Medical Properties Trust Faces Risk Of Earnings Dilution Despite New Tenant Leases, Analyst Says

Colliers Securities upgraded Medical Properties Trust, Inc. MPW stock to a Buy rating and announced a $6.5 price target.

Also, Truist Securities analyst Michael Lewis raised its price target from $5 to $6 while maintaining the Hold rating.

On Wednesday, the medical REIT disclosed a global settlement with tenant Steward Health Care System, its secured lenders, and the Unsecured Creditors Committee.

The settlement covers 23 hospitals previously managed by Steward, with 15 hospitals in Arizona, Florida, Louisiana, Ohio, and Texas already leased to new tenants.

Medical Properties Trust anticipates receiving annual cash rental payments of about $160 million from the new leases, based on a $2 billion lease base, upon stabilization in the fourth quarter of 2026.

The analyst writes that they are adjusting the FFO estimates and price target and affirming a Hold rating due to anticipated earnings dilution from refinancing activities over the next few years.

Medical Properties Trust agreed to sell three Space Coast hospitals, with a significant portion of the proceeds transferred to Steward. Lewis says that these hospitals, combined with the nine in Massachusetts where Medical Properties Trust recovers nothing, suggest a 75% recovery rate of the $3.2 billion asset value reported in Medical Properties Trust’s first quarter supplemental package.

This estimate assumes Medical Properties Trust recovers $300 million from the six closed hospitals, $100 million from the two under construction, and $2 billion from the 15 transitioned, adds the analyst.

Lewis writes that while this aligns with their previous models, there is some risk due to uncertainties about non-operating asset values and the success rates of new operators.

The analyst revised the 2025 FFO estimate to $1.01 per share from $1.02 per share, still above the $0.92 consensus. The estimates indicate a 39.9% year-over-year decline in normalized FFO per share in 2024, followed by 6.0% growth in 2025.

The analyst projects declining FFO per share in each subsequent year through 2029 due to dilutive debt refinancing.

Also Read: European Central Bank Cuts Key Interest Rates As Inflation Cools

Price Action: MPW shares are up 12.4% at $6.295 at the last check Friday.

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