Welltower Inc.’s WELL senior housing operating (SHO) portfolio is well-poised to benefit from an aging population and a rise in healthcare expenditure by senior citizens. Moreover, favorable outpatient visit trends in the outpatient medical (OM) portfolio bode well for long-term growth. However, competition in the senior housing market pose key concern.

Analysts seem positive about this Zacks Rank #3 (Hold) company. The Zacks Consensus Estimate for its 2024 FFO per share has been revised marginally upward over the past week to $4.31.

What’s Aiding Welltower?

The senior citizen population is expected to rise in the coming years. This age cohort constitutes a major customer base of healthcare services and incurs higher healthcare expenditures than the average population, poising Welltower’s SHO portfolio well to capitalize on this positive trend. In 2024, management anticipates the same-store SHO net operating income to grow within 22-24%, from the previous guidance range of 19-23%, driven by favorable results and expectations for continued strength in the fourth quarter of 2024.

Historically, there has been a favorable outpatient visits trend compared with in-patient admissions. Banking on this, the company is optimizing its OM portfolio and growing relationships with health system partners and deploying capital in strategic acquisitions. Given the favorable secular trends and growing need for value-based care, the company’s efforts to strengthen its OM footprint will boost long-term growth.

WELL’s capital-recycling efforts highlight its prudent capital management practices and pave the way for long-term growth. From the beginning of 2024 through Oct. 28, 2024, it completed $4.54 billion of pro-rata gross investments, including $3.85 billion in acquisitions and loan funding and $696.1 million in development funding. During this period, the company completed pro rata property dispositions and loan repayments of $1.07 billion. As of Sept. 30, 2024, seven SHO and 10 triple-net properties were classified as held for sale.

Welltower has a healthy balance sheet position and ample liquidity to meet near-term obligations and fund its development pipeline. As of Sept. 30, 2024, it had $8.8 billion of available liquidity, including $3.8 billion of cash and restricted cash and full capacity under its $5 billion line of credit. As of Sept. 30, 2024, the net debt to adjusted EBITDA was 3.73X. Welltower’s debt maturities are well-laddered, with a weighted average maturity of 5.9 years, allowing it to access the debt market at favorable terms.

Over the past six months, shares of the company have gained 21% compared with the industry's 2.5% growth.

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What’s Hurting Welltower?

Welltower faces competition from national and local healthcare operators regarding factors such as quality, price and the range of services provided. It also competes for reputation, location, and demographics of the population in the surrounding area and the financial condition of its tenants and operators. Such competition is likely to limit the company’s power to significantly raise its top line and ink deals at attractive rates.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Crown Castle CCI and $Vornado Realty Trust(VNO-N)$ VNO, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Crown Castle’s 2024 FFO per share has been raised marginally over the past two months to $7.00.

The Zacks Consensus Estimate for Vornado’s current-year FFO per share has moved northward marginally over the past two months to $8.09.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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