Analyst Foresees Challenges For Medical Properties Trust, Expects 35% Dividend Cut

RBC Capital Markets analyst Michael Carroll lowered the price target of Medical Properties Trust Inc MPW to $10 from $12. The analyst added a Speculative Risk qualifier to the Outperform rating.

The analyst is taking a more conservative stance and lowering the estimates following Q2 FY23 results. 

On August 8, Medical Properties Trust reported Funds from operations (FFO) of $0.48, missing estimates of $0.70, and revenue of $337.39 million, also missing the consensus of $351.38 million. 

The analyst also pushed out the estimated Prospect CT sale to Q4 FY23 (from Q2 FY23) and continued to expect only around 50% recovery of the managed care value (about $327.5 million) in Q3 vs. Q2. 

The analyst estimates a $60 million rent cut in Q1 FY24 (reflecting ~20% of Steward’s rent).

The analyst believes the company can fix tight liquidity issues related to Steward by improving collections.

Carroll also assumes that MPW will not recognize any revenue from the Prospect PA mortgage and may cut dividend by 35% to $0.75 per share.

The analyst estimates that MPW has about $900+ million of dry powder (as of today), which can increase to around $925 million by year-end and further expand to over $1.35 billion in 2024.

The analyst believes MPW will have to address the debt maturities of $1.4 billion in Q1 2025 by taking new incremental debt or asset sales.

Consequently, Carroll lowered estimates for adjusted FFO/share to $1.14 from $1.21 in 2023, $1.16 from $1.31 in 2024, and $1.14 from $1.31 in 2025.

Also Read: Medical Properties Trust Faces Analyst Downgrades: Lingering Concerns Over Management And Dividend Sustainability Spotlighted

Price Action: MPW shares are trading down by 3.59% at $7.79 on the last check Monday.