Health Care REIT Upgraded to Buy - Analyst Blog

On Mar 11, 2014, Zacks Investment Research upgraded Health Care REIT Inc. HCN to a Zacks Rank #2 (Buy). The upgrade of this healthcare real estate investment trust (REIT) came on the back of its solid fourth-quarter 2013 results and improving operating fundamentals.

Why the Upgrade?

Health Care REIT has been witnessing positive estimate revisions thanks to decent fourth-quarter 2013 results, improving operating fundamentals and a dividend hike. The company reported fourth-quarter 2013 normalized funds from operations (FFO) of 99 cents per share, 2 cents ahead of the Zacks Consensus Estimate and up 14 cents year over year.

The 16.5% year-over-year increase is primarily attributable to robust revenue growth, decent same-store cash NOI (net operating income) and notable portfolio restructuring activity. Health Care REIT provided outlook for 2014 normalized FFO per share in a range of $3.93 – $4.03.

As disclosed previously, the company also declared a quarterly cash dividend of 79.5 cents per share, marking a rise of 4% over the year-ago dividend of 76.5 cents. This marked the company's 171st consecutive quarterly dividend payment, which was paid on Feb 20, 2014.

Health Care REIT boasts a strong portfolio of senior housing, skilled nursing, hospital and medical office facilities. Opportunistic acquisitions and developments are expected to further enhance the company's high-quality senior housing portfolio and extend its reach in the high-barriers-to-entry affluent markets. Aging population and rising healthcare expenses offer significant growth opportunities to this healthcare REIT.

Owing to these bullish factors, the tendency for an upward estimate revision has been obvious in recent times. Over the last 30 days, 6 out of 14 estimates have moved up and 2 down for 2014 and 3 out of 10 estimates moved north while 1 estimate moved south for 2015.

Additionally, the long-term earnings growth forecast for Health Care REIT is 5.73%. These made way for the upgrade in the rank.

Other Stocks to Consider

Apart from Health Care REIT, investors interested in the REIT industry may consider Cousins Properties Incorporated CUZ, Liberty Property Trust (LPT) and Public Storage PSA. All three stocks have a Zacks Rank #2 (Buy).


Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.