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Key Factors to Impact Medical Properties' (MPW) Q3 Earnings

Stellar revenues from transactions and improving fundamentals of its tenants are likely to have aided Medical Properties' (MPW) Q3 performance.

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This story originally appeared on Zacks

Medical Properties Trust, Inc.  MPW — also known as MPT — is scheduled to report third-quarter 2021 results on Oct 28, before the market opens. The company’s quarterly performance will likely display year-over-year growth in funds from operations (FFO) per share and revenues.



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



Over the trailing four quarters, the company beat the Zacks Consensus Estimate on one occasion, and met in the other three, the average beat being 1.28%.This is depicted in the graph below:

- Zacks

Let’s see how things are shaping up prior to this announcement.



During the third quarter, MPT is anticipated to have benefited from its premium acute care portfolio, aided by strong operator relationships. Improving fundamentals of the company’s tenants are likely to have aided its performance.



This REIT has been banking on its large scale to fund transactions globally. Further, the easily-available and attractive cost of capital is likely to have enabled the company to enjoy decent net investment yields and register growth. Its acquisition of acute care hospitals are expected to have provided support.



During the third quarter, MPT and HCA Healthcare agreed to a 15-year master lease for hospitals representing $1.2 billion of MPT assets, placing HCA Healthcare among the five largest tenants in the MPT portfolio. The HCA Healthcare master lease is expected to complete in the first half of 2022.



Also, during the quarter, MPT and Macquarie Infrastructure Partners V entered into a partnership for eight Massachusetts hospitals valued at $1.78 billion.



The Zacks Consensus Estimate for rent billed is pegged at $218 millionfor third-quarter 2021, suggesting a marginal improvement from the prior quarter’s $217 million and the year-ago period’s $193 million. Straight-line rent is estimated to be $58 million, calling for sequential growth from $55 million and a year-over-year increase from $51 million.



The consensus estimate for income from direct financing leases is pinned at $50 million, suggesting no growth sequentially and a decline from the $53 million reported in the year-ago quarter.



The Zacks Consensus Estimate for quarterly revenues is pegged at $388.31 million. This suggests a 17.86% year-over-year jump from the year-earlier quarter’s reported tally.



Prior to the quarterly earnings release, analysts seem to be optimistic about the company’s prospects as the Zacks Consensus Estimate for the July-September quarter’s FFO per share moved a cent north to 45 cents over the past month. It also suggests year-over year growth of 9.76%.

Here is what our quantitative model predicts:

Our proven model does not conclusively predict a surprise in terms of FFO per share for MPT this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a FFO beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.



MPT currently carries a Zacks Rank #3 and has an Earnings ESP of 0.00%.

Stocks That Warrant a Look

Here are a few stocks in the REIT sector that you may want to consider, as our model shows that these have the right combination of elements to report surprises this quarter:



Public Storage PSA, scheduled to report third-quarter earnings on Nov 1, currently has an Earnings ESP of +0.69% and carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.



Life Storage, Inc. LSI, slated to release quarterly numbers on Nov 2, has an Earnings ESP of +0.21% and carries a Zacks Rank of 2, at present.



Ventas Inc. VTR, scheduled to report quarterly numbers on Nov 5, currently has an Earnings ESP of +1.28% and carries a Zacks Rank of 3.



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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