Cantor Fitzgerald Likes 'Out Of Favor' Omega Healthcare

Health care REIT Omega Healthcare Investors Inc OHI, which has fallen out of favor with investors due to its skilled nursing facility focus and liquidity issues at several of its operators, has found a bull in Cantor Fitzgerald.

The Analyst

Cantor Fitzgerald analyst Joseph France initiated coverage of the shares of Omega Healthcare Investors with an Overweight and $34 price target.

The Thesis

The skilled nursing associated with Omega Healthcare Investors is attractive in a value-based reimbursement environment, France said in a Wednesday note. (See the analyst's track record here.) 

This environment, along with the stock's 9.1-percent yield, will compensate investors for the operator risk, France said. 

" ... We believe that OHI's problems with three operators will be resolved in 2018 as their portfolios are restructured or transitioned." 

Omega's extended geographic reach and experience make it an important post-acute partner for medium and large health care systems, as providers take on more risk and the industry consolidates, according to Cantor Fitzgerald.

Favorable demographic trends are catalyzing industry growth, with the number of individuals over 65 expected to double by 2050.

"We believe that OHI's higher yield and better dividend coverage will drive the valuation higher as the restructuring of challenged operators strengthens results and boosts returns," France said. 

The Price Action

The shares of Omega Healthcare Investors are down about 14 percent year-to-date.

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