Medical Properties, Ventas downgraded at BofA, Sabra raised after Q2 earnings

After digesting healthcare REIT Q2 earnings and management’s commentary on the earnings calls, BofA analyst Joshua Dennerlein downgraded Medical Properties Trust (NYSE:MPW) and Ventas (NYSE:VTR) and upgraded Sabra Health Care REIT (NASDAQ:SBRA)
He cut Medical Properties Trust (MPW) to Underperform from Neutral after the REIT increased its exposure to its top tenant through an asset-backed credit facility. The lead role of private credit funds in that refinancing also signals the risk involved, Dennerlein said.
Management’s communication about its guidance also presented another concern. MPW’s Q2 earnings included an 11 cent per share benefit from the receipt of equity in a business owned by one of its tenants, Prospect. On the earnings call, management said it was included in guidance, but investors appeared to be unclear about that.
Note that Raymond James also downgraded Medical Properties (to Underperform from Strong Buy), partly due to management’s communications, but also on the potential for a dividend cut.
Medical Properties (MPW) stock slid 7.4% in early Friday trading.
The Ventas (VTR) downgrade to Neutral from Buy reflected the REIT’s Holiday US independent living portfolio lagging its expectations. “Note that in 2019 VTR struggled with forecasting the performance of assets that transition to ESL. This led to guidance cuts. Our downgrade reflects concern that history may repeat itself,” Dennerlein wrote. Ventas stock dipped 1.2%.
Sabra Health Care (SBR) was upgraded to Neutral from Underperform as BofA pointed to the potential for upside from a senior housing recovery, management’s new discipline to external growth, and valuation relative to peers. Sabra shares gained 1.2% in early Friday trading.
The quarter’s results also reinforced Dennerlein’s conviction on Welltower (NYSE:WELL) as a top pick. “We see significant upside to Street estimates in 2024 as they continue to roll out the operating platform,” he said.
The SA Quant system has a Hold rating on Ventas (VTR), Medical Properties (MPW), Sabra (SBRA), and Welltower (WELL) as seen in the peers comparison tool. The average Wall Street rating is Buy for VTR, MPA, and WELL and Hold on SBRA.