Welltower Inc. Q3: Plenty Of Demand, But It's Too Expensive For Me

seekingalpha11-19

Welltower Inc. reported strong Q3 results with a 24.1% revenue increase and improved financial position, but growth may already be priced in.The company’s SSNOI and SHO portfolio showed significant ...

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Q3: Plenty Of Demand, But It's Too Expensive For Me","media":"seekingalpha","content":"<div>\n<p>Welltower Inc. reported strong Q3 results with a 24.1% revenue increase and improved financial position, but growth may already be priced in.The company’s SSNOI and SHO portfolio showed significant ...</p>\n\n<a href=\"https://seekingalpha.com/article/4738483-welltower-inc-q3-plenty-of-demand-but-its-too-expensive-for-me\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Welltower Inc. 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Q3: Plenty Of Demand, But It's Too Expensive For Me\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-19 05:45 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4738483-welltower-inc-q3-plenty-of-demand-but-its-too-expensive-for-me><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Welltower Inc. reported strong Q3 results with a 24.1% revenue increase and improved financial position, but growth may already be priced in.The company’s SSNOI and SHO portfolio showed significant ...</p>\n\n<a href=\"https://seekingalpha.com/article/4738483-welltower-inc-q3-plenty-of-demand-but-its-too-expensive-for-me\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4585","symbol_name":"ETF&股票定投概念","start_time":0,"source_url":"https://seekingalpha.com/article/4738483-welltower-inc-q3-plenty-of-demand-but-its-too-expensive-for-me","article_id":"2484681149","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1356566232/image_1356566232.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2484681149","pubTimestamp":1731966336,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Welltower Inc. reported strong Q3 results with a 24.1% revenue increase and improved financial position, but growth may already be priced in.The company’s SSNOI and SHO portfolio showed significant gr","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4585":"ETF&股票定投概念","WELL":"WELLTOWER OP LLC","BK4203":"医疗保健房地产投资信托","BK4588":"碎股","BK4225":"医疗保健房地产信托"},"translate_title":"Welltower Inc.第三季度：需求充足，但对我来说太贵了","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"WELL":0.9},"content_text":"Welltower Inc. reported strong Q3 results with a 24.1% revenue increase and improved financial position, but growth may already be priced in.The company’s SSNOI and SHO portfolio showed significant growth, and 2024 guidance has been revised upwards, indicating continued momentum.Despite a positive outlook for senior housing demand, I am cautious due to high debt levels and current valuation, leading to a hold rating.WELL's dividend growth is modest, and its intrinsic value suggests it's a bit expensive, so I'll keep it on my watchlist for now.   Maskot  Introduction Welltower Inc. (NYSE:WELL) recently reported decent Q3 results. The REIT’s operations are growing; however, this may already be priced in, and I wouldn’t be surprised if the growth in share price underperforms in the upcoming years. I am initiating my coverage with a hold rating. Q3 Results Revenues came in at $2.06B, +24.1% y/y, which beat analysts’ estimates by $60m. Q3 FFO came in at $1.11, +20% y/y, and beat analysts’ estimates by 7 cents. Looking deeper at the revenue breakdown, Resident Fees and services came in at $1.5B, +26 y/y, making up the majority of the revenue. Rental income came in at $430.5m, +12% y/y. Same-store Operations Net operating income, or SSNOI, saw a growth of 12.6%, primarily driven by substantial growth in the Seniors Housing Operation [SHO] portfolio of 23%. SHO portfolio same-store revenue increased around 9%, which was driven by a 310bps increase in occupancy growth and revenue per occupied room of 5%. SSNOI margin improved by 3%, driven primarily by revenue per occupied room, which has been “meaningfully outpacing expense per occupied room.” Regarding the company’s financial position, WELL ended the quarter with $3.5B in cash and equivalents, which almost doubled from the end of FY23 against 15.8B in long-term debt. The company’s net debt position has improved to 3.73x compared to last year’s 5.14x, so the debt is getting much more manageable. The company likes to use another formula to decide whether the debt is manageable or not, which is net debt to consolidated EV. It also has improved substantially y/y from 21% to 13.1%. I think anything under 30% is not too risky, and we can see that it is substantially lower. However, I also like to look at the company’s ability to cover its interest expense. Here, the company’s EBIT was $184m, while interest expense for the quarter came in at $139m, which means its interest coverage ratio is around 1.3x, which is slightly low in my opinion. I like to see at least a 5x, while analysts consider 2x to be sufficient. However, given the company’s substantial cash position, it is not particularly a problem right now. Furthermore, the company updated its 2024 guidance. The company now expects its average blended SSNOI to be in the range of 11.5% to 13%, with Senior Housing growth to be from 22% to 24%. The company’s bottom line has also been revised up to $1.75 to $1.81 a share, up from the range of $1.52 to $1.60 a share. The management also went ahead and increased the range of full-year normalized FFO to $4.27-$4.33 from the previous range of $4.13-to $4.21 per diluted share. Overall, a beat and a raise are always good to see from companies. The growth in the main revenue generator was outstanding, and with the updated guidance, it appears that the momentum remains here. An improvement in operations regarding efficiency and profitability is also very welcomed, as well as the company’s financial situation improvements. Not a bad quarter at all. Comments on the Outlook I think the outlook for REITs like WELL is very positive. With the advancements in medical science, there are a lot more people aged 80 and over, and still rapidly rising. According to the WHO, this demographic will triple over the next 30 years to reach 426m. There seems to be plenty of growth, and WELL is positioned well (no pun intended) to capitalize on this trend. What is also important to note here is that these people are much wealthier, too, which means they can afford higher-quality senior living options. There is also a shift in the way these people want to live the rest of their lives. Some may look for assisted living, others may want to live independently, which can be a lot more costly over the long run compared to assisted. According to the transcript, there will be 5,000 new 80-year-olds every day in 2025, with an expectation of further ramp-up. Not to sound morbid, but there are always going to be old people who will require the company’s services as more and more people live longer and get older. Additionally, specialized dementia care in nursing homes is on the rise and linked to better outcomes for patients. Dementia is expected to increase over the next decades, which means the demand for such care will certainly grow, to the benefit of WELL’s operations. With the interest rates finally starting to come down, unless they reverse all of a sudden, I expect new housing projects to start ramping up over the next decade. It may not happen over the coming years since interest rates are still elevated. However, after a while, the world will either accept a higher interest-rate environment and start building to meet the ever-growing demand for senior housing, or interest rates will get back to historic lows. Closing Comments Even though there is quite an opportunity ahead for the company, I don’t think I will be investing right now. We don’t know where the interest rates will settle and what the population will want to do regarding how they want to live out their golden years. Regarding the company’s financial position, I don’t like its debt pile too much, as it eats away a lot of its operating income. I would like to see a meaningful debt reduction. Additionally, I don’t think the company is trading at a cheap price, as well as it is not paying a particularly high dividend for those investors. According to Seeking Alpha, the company has just started raising its dividend. Back in 2020, the dividend was cut from $3.48 a year to $2.44 by FY23, only to be increased by a few cents over the last while. A quick DDM valuation tells me the company’s intrinsic value is around $56 a share. Additionally, the Seeking Alpha comparison tool gave me the below REITs that are within the same industry (may not necessarily be in senior home operations). It shows us that WELL’s FW P/FFO is head and shoulders above everyone else, which tells me that the growth is already priced in, and I wouldn’t be surprised if we see lackluster performance over the coming years.     WELL VTR ARE DOC OHI HR   FW P/FFO 32 20 11 11.6 14 11   Click to enlarge  Therefore, I think it’s a bit expensive, and I will keep it on my watchlist for now and probably forget about it for a while. Will revisit now and again to see what has changed.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":1,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2484681149"}