Ventas, Inc. (VTR – Free Report) is well-positioned to gain from its diverse portfolio of healthcare real estate assets in the key markets of the United States and the U.K. An aging population and the rise in healthcare expenditure by senior citizens are likely to benefit the senior housing operating portfolio (SHOP). The outpatient medical portfolio is expected to gain from favorable outpatient visit trends. Ventas’ accretive investments in expanding its research portfolio are encouraging.
Last month, this Chicago-based healthcare real estate investment trust (REIT) reported third-quarter 2024 results. The company reported normalized funds from operations (FFO) per share of 80 cents, in line with the Zacks Consensus Estimate. The results reflected better-than-anticipated revenues. Ventas’ same-store cash net operating income (NOI) increased year over year.
Shares of this Zacks Rank #2 (Buy) company have rallied 36.2% over the past six months, outperforming its industry’s growth of 16.3%. Given the strength in its fundamentals, there seems to be additional room for growth of this stock.
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Factors That Make Ventas a Solid Pick
Favorable Demand in Senior Housing Portfolio: The senior citizens’ population is expected to rise in the years ahead. As a result, the national healthcare expenditure by senior citizens, who constitute a major customer base of healthcare services and incur higher healthcare expenditures than the average population, will likely increase in the upcoming period.
Per the company’s third-quarter 2024 earnings presentation, the U.S. population aged 80 years and above is expected to grow 27% over the next five years. With acceleration in 80+ population growth and low new supply in its markets, VTR is expected to drive broad-based multiyear net absorption.
Ventas has closed or placed under contract $1.7 billion of senior housing investments from the beginning of 2024 through Oct. 30, 2024. This initiative highlights the company’s ability to capture value-creating opportunities in senior housing.
In SHOP, Ventas generated 15.3% same-store cash NOI growth in the third quarter of 2024. Ventas expects its SHOP segment’s same-store cash net operating income to grow between 14% and 16% in 2024.
Focus on OM&R Portfolio: Amid favorable demographics and growing outpatient trends, Ventas is committed to capitalizing on this upside within its outpatient medical and research (OM&R) portfolio, which includes outpatient medical buildings and research centers.
The growth in people aged 65 years and above is driving the increase in outpatient visits as they make three times more visits to the doctor than the general population. From 2020 to 2030, the 65+ aged population is expected to grow by 28%. Therefore, this portfolio is well-positioned to capitalize on this rising demand.
Ventas expects the OM&R portfolio’s same-store cash NOI to grow in the range of 2.75-3.25% in 2024.
VTR’s Accretive Investments: Ventas is carrying out accretive investments to enhance its research portfolio, which is essential for the delivery of crucial healthcare services and research related to life-saving vaccines and therapeutics. Ventas owns research centers in life science clusters, with a presence in some of the top-tier research university campuses. With top-rated tenants and long-lease terms, its high-quality portfolio assures steady growth in cash flows.
Balance Sheet Strength: Ventas maintains a healthy balance sheet position. It has been making efforts to enhance its liquidity position and financial strength. As of Sept. 30, 2024, the company had approximately $4 billion of liquidity. It also enjoys favorable credit ratings of BBB+ from S&P Global Ratings and Baa1 from Moody’s, providing access to the debt market. The company’s decent financial flexibility is likely to support its growth endeavors.
Other Stocks to Consider
Some other top-ranked stocks from the broader REIT sector are Iron Mountain (IRM – Free Report) and Welltower (WELL – Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Iron Mountain’s 2024 FFO per share stands at $4.49, indicating an increase of 9% from the year-ago reported figure.
The Zacks Consensus Estimate for Welltower’s 2024 FFO per share is pinned at $4.26, suggesting year-over-year growth of 17%.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
