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Ventas' (VTR) Outlook Raised by S&P Global, Rating Maintained

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Ventas, Inc. VTR recently announced that its rating outlook has been upgraded by S&P Global Ratings (“S&P”) to stable from negative. Additionally, Ventas’ issuer credit rating has been affirmed at BBB+ by the rating agency.

S&P envisages a gain in momentum in Ventas’ operating performance, with the company capitalizing on the senior housing recovery.

Particularly, S&P has acknowledged that Ventas experienced an expansion of 420 basis points (bps) since the pandemic in early 2021 in its same store Senior Housing Operating Portfolio (SHOP) occupancy, ending the first quarter of 2022 at an average of 83%. The rating agency expects Ventas’ occupancy to continue recovering amid healthy demographic trends and a favorable supply backdrop.  

Further, Ventas’ balance sheet position has been reinforced by its fixed-rate debt and the recent extension of the debt maturity schedule. The company enjoys ample liquidity, with $2.2 billion available at the end of the first quarter.

Awarding Ventas with this outlook revision and rating affirmation will likely boost the company's creditworthiness in the market and in all likelihood, intensify investors' confidence in the stock. Such encouraging moves allow the company to enjoy favorable costs on debts and solid access to capital.

Ventas reported first-quarter 2022 normalized funds from operations (FFO) per share of 79 cents, beating the Zacks Consensus Estimate of 77 cents. This figure climbed 9.7% year over year from 72 cents. It generated revenues of $1.02 billion in the first quarter, increasing 11.8% year over year.

The quarterly results reflect improvement in occupancy and pricing power for the SHOP segment. Additionally, the triple-net leased and office portfolios witnessed growth in same-store net operating income (NOI) due to contractual escalators.

Further, the company estimates SHOP segment same-store cash NOI for the second quarter to be between 2% and 10% based on expected growth in occupancy of 400 bps and improved rates.

Ventas currently carries a Zacks Rank #3 (Hold). Its shares have gained 3.5% against the industry’s decline of 4.3% over the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Key Picks

Some better-ranked stocks from the REIT sector are Prologis PLD, Extra Storage Space EXR and OUTFRONT Media OUT.

The Zacks Consensus Estimate for Prologis’ 2022 funds from operations (FFO) per share has moved 1.8% upward in the past month to $5.15. PLD presently carries a Zacks Rank of 2 (Buy).

The Zacks Consensus Estimate for Extra Storage Space’s ongoing year’s FFO per share has been raised 1.1% over the past month to $8.01. EXR carries a Zacks Rank #2, currently.

The Zacks Consensus Estimate for OUTFRONT Media’s current-year FFO per share has moved 35% northward in the past month to $2.09. OUT carries a Zacks Rank of 2 at present.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.


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