CareTrust's Growth Prospects: Analyst Upgrades Amid Growing Pipeline Of Opportunities, Accretive Acquisitions

BMO Capital Markets analyst Juan C. Sanabria upgraded CareTrust REIT, Inc. CTRE from Market Perform to Outperform, raising the price target to $24 from $23.50.

Sanabria sees limited risks over the near-to-medium term from pending minimum staffing regulation. 

At the same time, the analyst adds that accretive acquisitions have re-emerged with private buyers partially sidelined & CTRE enjoying a solid cost of capital with a growing pipeline of opportunities.

Sanabria applauds CTRE's solid and growing pipeline ($150 million) after executing a robust $215 million in new investments year-to-date at 8.5%.

The analyst is remarkably upbeat about skilled nursing (SNF) amidst a more constructive reimbursement environment.

The analyst thinks that SNF fears are receding as occupancy and labor availability continue to improve, albeit slowly.

As labor challenges & occupancy have slowly improved, the analyst sees diminished chances for future SNF rent cuts/deferrals with CTRE nearly done with its repositioning.

CTRE has a solid top tenant roster that's now primarily repositioned post-COVID, highlighted by The Ensign Group, Inc.  ENSG (35% of rents), a blue-chip SNF operator with 3.3x EBITDAR rent coverage, notes the analyst.

CTRE also has a strong balance sheet, and management has deep industry experience, the analyst adds.

However, the company may bear the brunt of new tenant issues emerging or investment competition intensifying. 

Price Action: CTRE shares are trading lower by 0.25% to $19.84 on the last check Wednesday.