Earnings Scorecard: HCP - Analyst Blog
May 10 2012 - 1:07PM
Zacks
HCP Inc. (HCP), a leading healthcare real
estate investment trust (REIT), reported first quarter 2012 funds
from operations (FFO) of$264.8 million or 64 cents per share
compared with $149.7 million or 40 cents per share in the
year-earlier quarter. Funds from operations, a widely used metric
to gauge the performance of REITs, are obtained after adding
depreciation and amortization and other non-cash expenses to net
income.
We cover below the results of the recent earnings announcement,
as well as the subsequent analyst estimate revisions and the Zacks
ratings for the short-term and long-term outlook for the stock.
Earnings Report Review
Recurring FFO for the reported quarter was $275.2 million or 67
cents per share compared with $181.9 million or 56 cents per share
in the year-ago quarter. Recurring FFO in the reported quarter
was in line with the Zacks Consensus Estimate.
HCP reported total revenue of $459.0 million during the quarter
compared with $331.1 million in the year-ago period. Total revenue
in the reported quarter missed the Zacks Consensus Estimate of
$468.0 million.
(Read our full coverage on this earnings report: Mixed 1Q for
HCP, FFO Soars)
Earnings Estimate Revisions - Overview
Fiscal earnings estimates for HCP have moved down since the
earnings release, implying that the analysts are bearish about the
long-term performance of the company. Let’s dig into the earnings
estimate details.
Agreement of Estimate Revisions
In the last 7 days, earnings estimates for fiscal 2012 were
increased by 1 out of 16 analysts covering the stock, while 2
analysts revised it downwards. For fiscal 2013, 2 out of 16
analysts covering the stock revised their estimates downward, while
none moved in the opposite direction. This indicates a clear
negative directional movement for the fiscal year earnings and
signifies that the analysts hold a grim outlook regarding the
long-term earnings of the company.
Magnitude of Estimate Revisions
Earnings estimate for fiscal 2012 have decreased by 1 cent in
the last 7 days to $2.73. For full year 2012, HCP expects FFO in
the range of $2.71 to $2.77 per share. For fiscal 2013, earnings
estimates have remained constant at $2.89 per share in the last 7
days. This indicates the analysts hold a cautious stance regarding
the long-term earnings of the company as market fundamentals are
not very encouraging.
Moving Forward
The long-term earnings estimate picture for HCP is neutral. HCP
is the leading medical REIT in the US with one of the largest and
most diversified portfolios in the healthcare sector with exposure
to all types of facilities. The product diversity of the company
allows it to capitalize on opportunities in different markets based
on individual market dynamics, and provides a competitive advantage
over its peers.
Healthcare is also relatively immune to the economic problems
faced by office, retail and apartment companies. Consumers will
continue to spend on healthcare while cutting out on discretionary
purchases. The healthcare industry is the single largest industry
in the US, based on Gross Domestic Product (GDP), and offers
stability to the company in a volatile market.
However, one of the biggest risks to healthcare focused REITs is
government reimbursement rates, which are proposed to be reduced in
the coming years. Deep cuts in Medicare have been proposed over the
next five years by reducing or freezing payments to skilled nursing
facilities, hospitals and other healthcare providers.
With a large portion of HCP’s revenues being determined by
government payout rates, forces beyond its direct control could
negatively affect revenue and operator coverage ratios.
HCP currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. We are also maintaining our long-term
Neutral recommendation on the stock. One of its competitors,
Health Care REIT, Inc (HCN) also holds a Zacks #3
Rank.
About Earnings Estimate Scorecard
As a PhD from MIT, Len Zacks proved over 30 years ago that
earnings estimate revisions are the most powerful force impacting
stock prices. He turned this ground breaking discovery into two of
the most celebrating stock rating systems in use today. The Zacks
Rank for stock trading in a 1 to 3 month time horizon and the Zacks
Recommendation for long-term investing (6+ months). These “Earnings
Estimate Scorecard” articles help analyze the important aspects of
estimate revisions for each stock after their quarterly earnings
announcements. Learn more about earnings estimates and our proven
stock ratings at http://www.zacks.com/education
HEALTH CR REIT (HCN): Free Stock Analysis Report
HCP INC (HCP): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
HCP (NYSE:HCP)
Historical Stock Chart
From Mar 2024 to Apr 2024
HCP (NYSE:HCP)
Historical Stock Chart
From Apr 2023 to Apr 2024