Why REIT Medical Properties Trust Shares Are Dipping Today

Medical Properties Trust Inc MPW shares are trading lower by around 10% after Stifel analyst Stephen Manaker downgraded the stock to Hold from Buy at a lowered price target of $4.50 from $12.

The analyst is concerned about operator stress, delay in closing the asset sale to Yale, and the largest tenant (Steward) partially paying rent late.

Also, the 'higher for longer' interest rate environment and difficulty in getting credit will likely increase tenant credit issues, writes the analyst.

Last month, MPW reported Q3 FY23 revenue of $306.6 million, missing the consensus of $341.8 million, and normalized FFO of $0.38 was below the prior year figure of $0.45.

MPW raised the FY23 FFO guidance range to $1.56-$1.58 from $1.53-$1.57 earlier.

Manaker expects a step down in 2024 earnings as MPW focuses on divesting additional assets and reducing leverage.

The analyst is increasing its FY23 normalized FFO estimate to $1.56 from $1.54 but decreasing the FY24 estimate to $1.41 from $1.48. 

For FY23, the analyst anticipates higher interest expense and remaining Healthscope and Prime asset divestiture, partly offset by expected rent from Prospect's California portfolio (50% beginning in September). 

The analyst projects quarterly earnings to be volatile as MPW resolves the Prospect situation. The analyst sees monetization of $600 million related to it in Q4 FY24 and expects the company to use these proceeds to reduce debt. 

The amount and timing of this monetization is a key variable on the analyst's FY24 estimate and expects growth of -14.3% in FY23 and -9.6% in FY24.

Price Action: MPW shares are down 9.37% at $4.20 on the last check Friday.