Ventas Hits 52-Week High: Will the Stock Trend Higher?

Shares of Ventas VTR scaled a new 52-week high of $51.94 on Jul 3. Moreover, over the past three months, VTR has gained 20.3%, outperforming the industry.

This Chicago-based healthcare real estate investment trust (REIT) is witnessing an upward trend in its stock price due to favorable fundamentals. Rising healthcare spending and an aging population continue to aid Ventas' senior housing operating portfolio. Also, the outpatient medical portfolio is expected to continue gaining from favorable outpatient visit trends.

In May, Ventas came up with a solid first-quarter 2024 performance. The results reflected better-than-anticipated revenues. The company's same-store cash net operating income (NOI) increased year over year on strong performance across the portfolio, except for triple-net leased properties.

Image Source: Zacks Investment Research

Let's delve deeper into what's driving the stock.

Key Growth Drivers

Favorable SHOP Dynamics: The senior citizen 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 for healthcare services and incur higher healthcare expenditures than the average population, is likely to increase in the upcoming period.

With an expectation of a rising senior citizens population in the years ahead and muted new supply in its markets, VTR is well-prepared for a compelling multiyear growth opportunity.

The U.S. senior housing multiyear growth opportunity is driven by record demand and decelerating new supply. The company expects favorable supply-demand fundamentals, its well-invested properties and operators supported by its Ventas OI platform to drive growth. Our estimate indicates a year-over-year rise of 18.3% in the SHOP segment's NOI in 2024.

Growing OM Visit Trend: Amid favorable demographics and growing outpatient trends, Ventas is committed to capitalizing on this upside within its outpatient medical and research portfolio, which includes outpatient medical buildings and research centers.

The same-store NOI growth for this segment was more than 3% in 2022 and 2023. While we estimate a 1.3% year-over-year increase in 2024, the company's outpatient medical and research segment's NOI is expected to grow 4.7% in 2025.

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. The company owns research centers in life science clusters, with a presence in some of the top-tier research university campuses.

Balance Sheet & Cash Flow Strength: Ventas maintains a healthy balance sheet position and takes appropriate measures to enhance its liquidity position and financial strength. As of Mar 31, 2024, its liquidity totaled $3.4 billion of liquidity. In addition, the company also enjoys credit ratings of BBB+ stable from S&P Global Ratings and Baa1 stable from Moody's, rendering it access to the debt market at favorable costs. With enough financial flexibility, Ventas is well-positioned to capitalize on growth opportunities.

VTR's current cash flow growth is projected at 19.51% against the 5.32% decline estimated for the industry.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Alexandria Real Estate Equities ARE and Americold Realty Trust COLD, each carrying a Zacks Rank #2 (Buy) at present.

The Zacks Consensus Estimate for ARE's 2024 FFO per share stands at $9.49, indicating an increase of 5.8% from the year-ago reported figure.

The Zacks Consensus Estimate for COLD's 2024 FFO per share is pinned at $1.44, suggesting year-over-year growth of 13.4%.

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.

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