Ventas Delivers Mixed Q2 Results; Shares Fall

Ventas, Inc. (VTR) delivered better-than-expected second-quarter Funds from Operations (FFO), backed by a solid performance in all of its segments. However, shares dropped 2.8% to close at $58.30 on August 6, as the company fell short of revenue expectations and provided conservative guidance.

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Ventas is a real estate investment trust that engages in the acquisition and ownership of seniors housing and healthcare properties. (See Ventas stock charts on TipRanks)

The company reported second-quarter FFO of $0.73 per share, down 5.2% from the year-ago period but marginally higher than the consensus estimate of $0.72 per share.

That being said, revenue declined 2.5% to $919.19 million, missing analysts’ estimates of $921.5 million.

The company’s Senior Housing Operating Portfolio (SHOP) segment witnessed robust sequential occupancy improvement, with five straight months of growth in occupancy and leads.

Moreover, the company’s other two segments, Office and Triple Net (NNN), showed a consistent and solid performance during the quarter, with Office reporting both year-over-year and sequential same-store cash net operating income (NOI) growth.

Debra A. Cafaro, the company’s Chairman and CEO, said, “Senior housing is entering a period of highly favorable conditions as occupancy rebounds and supply-demand fundamentals improve…We are confident about the future of our business, the powerful senior housing cyclical upside, and our ability to win the recovery with our advantaged, well-diversified portfolio, best-in-class operators, and experienced team.”

Looking ahead, the company guided for third-quarter FFO to land in the range of $0.70-$0.74 per share, while the consensus estimate is pegged at $0.73 per share.

In response to the company’s second-quarter results, BMO Capital analyst Juan C. Sanabria maintained a Sell rating on the stock with a price target of $57, implying 2.2% downside potential to current levels.

Sanabria said, “The focus continues to be on SHOP occupancy that is outpacing peers, but seemingly driven by higher discounting…We continue to see upside risk to FY2021 dispositions. We look to gauge VTR’s willingness to materially increase senior housing exposure in a recovery vs. its traditional focus on diversity.”

The analyst also highlights the absence of new material acquisition announcements by the company other than the already stated SNR merger.

The Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 6 Buys, 8 Holds, and 1 Sell. The average Ventas price target of $61.33 implies 5.2% upside potential to current levels. Shares have gained 36.9% over the past year.