Ventas (VTR) Q2 Earnings: What's in the Cards for the Stock?

Healthcare real estate investment trust ("REIT") Ventas, Inc. VTR is expected to report second-quarter 2016 results on Jul 29, before the market opens. Last quarter, the company delivered a positive surprise of 1.96%.

For the trailing four quarters, Ventas posted an average positive surprise of 2.12%, surpassing estimates on all four occasions. The Zacks Consensus Estimate for the second-quarter funds from operations ("FFO") is currently pegged at $1.03.

Let's see how things have shaped up for this announcement.

Factors to Consider This Quarter

Ventas has a large and diversified portfolio in the healthcare sector with exposure to all types of facilities. This allows the REIT to capitalize on a wide range of opportunities.

Further health expenses are anticipated to rise in the coming years with senior citizens incurring higher medical expenses compared to the average population. Therefore, in the wake of retiring baby boomers, Ventas is expected to benefit from this trend.

However, in recent times, Ventas has undertaken a spate of acquisition and redevelopment activities. Though beneficial over the long term, such activities entail huge expenses that will affect the company's near-term performance to some extent.

Earnings Whispers

Our proven model does not conclusively show that Ventas will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP:  Both the Most Accurate estimate and the Zacks Consensus Estimate currently stand at $1.03, which translates into an Earnings ESP of 0.00%.

Zacks Rank: Ventas' Zacks Rank #2, when combined with 0.00% Earnings ESP, makes surprise prediction difficult.

Note that, we caution against stocks with Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are a few stocks in the real estate investment trust sector you may want to consider, as our model shows that they have the right combination of elements to post a positive surprise this quarter:

Sun Communities Inc. SUI has an Earnings ESP of +2.44% and a Zacks Rank #2. The company will report results on Aug 2.

Regency Centers Corporation REG has an Earnings ESP of +1.25% and a Zacks Rank #3. The company will release results on Aug 2.

National Health Investors Inc. NHI has an Earnings ESP of +0.83% and a Zacks Rank #2. The company will report results on Aug 5.

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. All earnings per share numbers presented in this write up represent FFO per share.

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