Shares of Ventas Inc. (VTR) scaled a new 52-week high of $ 80.06 at the end of the trading session on Jan 22. This reflected a solid return of 36.6% over the past one year. The trading volume for the session was nearly 3.2 million shares.
Broader REIT market was optimistic as well, driven by expectations for a continued low rate environment for an extended time in the U.S. This assumption is backed by modest growth pace of the economy, the launching of 1 trillion-euro rescue plan by the European Central Bank and the International Monetary Fund’s (“IMF”) advice toward advanced economies for retaining accommodative monetary policies.
Despite scaling such high, we believe that this healthcare real estate investment trust (“REIT”) can prove to be a good choice for investors, given the improving market fundamentals, favorable rate environment and the recent American Realty Capital Healthcare Trust acquisition.
Growth Drivers
Recently, Ventas closed the acquisition of its competitor, American Realty Capital Healthcare Trust Inc. (“HCT”). Through the deal, the company gained a high quality portfolio of medical office buildings and private pay senior living communities.
We view this acquisition as a strategic fit for Ventas. The deal not only added 4 million square feet to the company’s portfolio, but also boosted its client base with over 20 new health systems. Moreover, the transaction brought 10 new senior living operators to Ventas’ business, producing consistent, growing cash flows.
Going forward, we believe that Ventas’ adequate size and scale would help it to capitalize on the opportunities available in the healthcare real estate market, and eventually, ride on the growth trajectory.
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% above the year-ago quarter figure of $1.04.
Ventas is slated to release fourth-quarter and full year 2014 results before the opening bell on Feb 13, 2015. The Zacks Consensus Estimate currently stands at $1.13 cents per share for the quarter and $4.46 for the year.
Over the last 30 days, the Zacks Consensus Estimate for 2014 and 2015 remained unchanged at $4.46 and $4.66, respectively. Ventas currently has a Zacks Rank #3 (Hold).
Other Stocks Scaling Highs
Other real estate industry stocks that have scaled 52-week highs on Jan 22 include Boston Properties Inc. (BXP), Excel Trust, Inc. (EXL) and General Growth Properties, Inc (GGP).
Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.
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