Will Ventas (VTR) Ride the Growth Curve on Acquisitions? - Analyst Blog

Ventas Inc. (VTR), with its diversified portfolio and strategic acquisitions, is actively capitalizing on growth opportunities amid increasing healthcare spending, aging population and a rise in insured individuals in the U.S.

In fact, recently, Ventas moved a step closer to its merger with American Realty Capital Healthcare Trust Inc., with the Securities and Exchange Commission (“SEC”) declaring the Form S-4 related to this merger as effective. Prior to that, the company closed the Holiday Retirement portfolio buyout. The merger is expected to close in January itself, provided closing norms of the deal are met.

Moreover, helped by growth in revenues and accretive investments, Ventas’ third-quarter 2014 normalized FFO of $1.12 per share came nearly 1% ahead of the Zacks Consensus Estimate of $1.11 per share. The figure was also 8% higher than the year-ago quarter figure of $1.04.

The company increased its full-year 2014 normalized FFO per share outlook to $4.44 – $4.47 from the prior projection of $4.39 – $4.43, reflecting around 8% – 9% per share growth in 2014, excluding non-cash items. And in December, it announced a 9% hike in its fourth-quarter 2014 dividend to 79 cents per share.

Going forward, we believe that the strategic acquisitions, in sync with the company’s plan of focusing on the private-pay properties, will also serve to strengthen its medical-office buildings footprint as well as international existence. Further, decent cash flows would add momentum to the company’s growth.

Yet, an anticipated rise in the interest rate in the long run and the company’s substantial exposure to long-term leased assets, remain our concerns. Also, the cut-throat competition in the markets limits Ventas’ pricing power to some extent.

To gain deeper insight into Ventas, you can refer to our updated research report, which was issued on Dec 26, 2014.

Over the last 7 days, the Zacks Consensus Estimate for 2014 and 2015 remained unchanged at $4.46 and $4.66 per share, respectively. The stock currently has a Zacks Rank #3 (Hold).

Stocks that Warrant a Look

Other better-ranked REIT stocks include Host Hotels & Resorts, Inc. (HST), Public Storage (PSA) and RLJ Lodging Trust (RLJ). All these stocks carry a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation, amortization and other non-cash expenses to net income.

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