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Key Factors to Impact Medical Properties' (MPW) Q1 Earnings

Medical Properties Trust, Inc. MPW — also known as MPT — is scheduled to report first-quarter 2023 results on Apr 27, before the market opens. The company’s quarterly results are expected to reflect a year-over-year decline in revenues and funds from operations (FFO) per share.

In the last reported quarter, this real estate investment trust (REIT), which acquires and develops net-leased hospital facilities, posted normalized FFO per share of 43 cents, in line with the Zacks Consensus Estimate.

Over the trailing four quarters, MPT beat the Zacks Consensus Estimate on one occasion and met the same in the remaining three, the average being 0.56%. This is depicted in the graph below:

Medical Properties Trust, Inc. Price and EPS Surprise

Medical Properties Trust, Inc. price-eps-surprise | Medical Properties Trust, Inc. Quote

Factors at Play

In first-quarter 2023, Medical Properties is likely to have benefited from its premium acute care portfolio. Its reliable, sustainable and inflation-protected cash-based business model is expected to have supported decent cashflow generation.

MPW’s healthy operator relationships and their efforts to capitalize on technological advances to increase efficiency, deliver quality patient care and reduce cost on a per patient basis bode well. As a result, amid declining staffing costs, the improving operating fundamentals of its tenants are likely to have driven its performance.

Moreover, to improve portfolio diversification with respect to the operator, this February, MPT announced that it will lease its entire Utah hospital portfolio to a wholly owned subsidiary of CommonSpirit Health — Catholic Health Initiatives Colorado (“CHIC”).  This will come into effect after Steward Health Care System sells the operations of the Utah facilities to CHIC.

The move is a strategic fit for MPT as it will improve overall cashflows given CommonSpirit’s strong investment-grade credit ratings and also make the latter one of MPT’s largest tenants.

However, higher interest expenses and exposure to certain troubled operators are expected to have cast a pall on its quarterly performance.

The Zacks Consensus Estimate for first-quarter 2023 rent billed is pegged at $221.9 million. The figure suggests a 4.3% and 15.8% decrease from the prior quarter’s $231.9 million and year-ago period’s $263.4 million, respectively.

Straight-line rent is estimated at $53.3 million, implying a fall from $58.1 million reported in the prior quarter and $61 million in the year-ago period.  

The consensus estimate for income from financing leases stands at $33.3 million, suggesting a decline from $51.8 million reported in the year-ago quarter.

The Zacks Consensus Estimate for quarterly revenues is pegged at $351.9 million, implying a 14.1% fall from the prior-year quarter’s reported figure.

Medical Properties’ activities during the first quarter were inadequate to garner analysts’ confidence. The Zacks Consensus Estimate for the quarterly FFO per share has been revised 7.5% downward to 37 cents over the past month. Also, the figure implies a year-over-year fall of 21.3%.

Earnings Whispers

Our proven model does not conclusively predict a surprise in terms of FFO per share for Medical Properties this season. The combination of a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — increases the odds of a beat. However, that’s not the case here.

Earnings ESP: MPW has an Earnings ESP of +3.80%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: MPW currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks That Warrant a Look

Here are some stocks that are worth considering from the REIT sector, as our model shows that these have the right combination of elements to deliver a surprise this reporting cycle:

American Tower AMT is slated to report quarterly numbers on Apr 26. AMT has an Earnings ESP of +0.63% and carries a Zacks Rank #3 presently.

Welltower WELL is scheduled to report first-quarter earnings on May 2. WELL has an Earnings ESP of +0.35% and a Zacks Rank #3 currently.

Equinix EQIX is scheduled to report first-quarter earnings on May 3. EQIX has an Earnings ESP of +0.44% and a Zacks Rank #2 (Buy) currently.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.

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