Ventas, Inc.’s VTR diverse portfolio of healthcare real estate assets is well-poised to capitalize on favorable industry fundamentals. The senior housing operating portfolio (SHOP) is likely to benefit from an aging population. The outpatient medical portfolio is expected to gain from the favorable outpatient visit trends. The accretive investments to expand its research portfolio look promising. A healthy balance sheet position is likely to support its growth endeavors.

Shares of this Zacks Rank #2 (Buy) company have gained 3.9% over the past six months, against its industry's decline of 6.8%. Given the strength of its fundamentals, there seems to be additional room for growth of this stock.

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Factors That Make Ventas a Solid Pick

Favorable Industry Dynamics: The senior citizen population is expected to rise in the years ahead. As a result, the national healthcare expenditure by senior citizens, who constitute a major customer base of healthcare services and incur higher healthcare expenditures than the average population, will likely increase in the upcoming period. Per the company’s fourth-quarter 2024 earnings presentation, the U.S. population aged 80 years and above is expected to grow by more than 28% in the next five years, driving significant demand for senior housing.

In order to meet the rising demand, the company is expanding its SHOP portfolio by converting 45 large-scale senior housing communities (comprising about 5,700 units) from the triple net structure to SHOP. In 2025, Ventas expects its SHOP segment's same-store cash NOI to grow between 11.0% and 16.0%.

Growing Outpatient Trends: Amid growing outpatient trends, Ventas is committed to capitalizing on this upside within its OM&R portfolio, which includes outpatient medical buildings and research centers. The growth in the population of people aged 65 years old and above is driving the increase in outpatient visits, as they make three times more visits to the doctor than the general population. From 2020 to 2030, the 65+ population is expected to grow by approximately 28%.

Accretive Research & Innovation Investments: Ventas is carrying out accretive investments to enhance its research portfolio, which is essential for the delivery of crucial healthcare services and research related to life-saving vaccines and therapeutics. The company owns research centers in life science clusters, with a presence in some of the top-tier research university campuses.

With top-rated tenants and long-lease terms, its high-quality portfolio assures steady growth in cash flows. In the OM&R portfolio, Ventas generated 2.1% same-store cash NOI growth in the fourth quarter of 2024. Ventas expects the OM&R portfolio's same-store cash NOI to grow in the range of 2.0-3.0% in 2025.

Balance Sheet Strength: Ventas maintains a healthy balance sheet. It has been making efforts to enhance its liquidity position and financial strength. As of Dec. 31, 2024, the company had approximately $3.8 billion in liquidity. It has already repaid $1.05 billion of first-quarter 2025 debt maturities.

In fourth-quarter 2024, its net debt to further adjusted EBITDA improved to 6.0x year over year from 6.9x. Management expects continued leverage improvement in 2025 driven by senior housing growth. Its access to diverse capital sources through capital recycling, third-party Ventas Investment Management, on-balance-sheet financing and internal cash flow provides ample financial flexibility and is likely to support its growth endeavors.

FFO Growth: Analysts seem bullish regarding VTR’s FFO per share growth prospects. The Zacks Consensus Estimate for the company's 2025 FFO has been revised marginally upward over the past week to $3.41. Concurrent with its fourth quarter 2024 earnings release on Feb. 12, 2025, Ventas issued guidance for 2025 FFO per share of $3.35-$3.46, with the midpoint at $3.41.

Other Stocks to Consider

Some other top-ranked stocks from the broader REIT sector are Welltower WELL and SL Green Realty SLG, each carrying a Zacks Rank of 2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Welltower’s 2025 FFO per share has moved marginally northward over the past week to $4.89.

The Zacks Consensus Estimate for SL Green Realty’s current-year FFO per share has been raised marginally northward over the past two months to $5.52.

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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This article originally published on Zacks Investment Research (zacks.com).

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