Shares of Ventas VTR have gained 14.1% in the past three months compared with the industry’s 0.3% growth.

This healthcare real estate investment trust (REIT) is well-poised to benefit from its diverse portfolio of healthcare real estate assets in the key markets of the United States and the United Kingdom. An aging population and the rise in healthcare expenditure by senior citizens are likely to benefit the senior housing operating portfolio (SHOP).

The outpatient medical portfolio is expected to gain from favorable outpatient visit trends. Ventas’ accretive investments to expand its research portfolio are encouraging.

Last month, this Chicago-based healthcare REIT reported fourth-quarter 2024 results. The company reported normalized funds from operations (FFO) per share of 81 cents, beating the Zacks Consensus Estimate by a penny. The results reflected an increase in total company same-store cash net operating income (NOI), mainly led by the 16.9% rise in SHOP same-store cash NOI.

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Let’s check out the possible factors behind the surge in the stock price for this Zacks Rank #3 (Hold) company and see whether the trend will continue.

The senior citizen population is expected to rise in the years ahead. As a result, the national healthcare expenditures of senior citizens, who constitute a major customer base for healthcare services and incur higher healthcare expenditures than the average population, are likely to increase in the upcoming period.

Per its fourth-quarter 2024 earnings presentation, low new supply in its markets and a rise in 80+ years aged population are expected to drive broad-based multiyear net absorption. A rapidly growing U.S. aging population is fueling the senior housing demand for this healthcare REIT. This is expected to drive the company’s top line. In fourth-quarter 2024, Ventas generated 16.9% SHOP same-store cash NOI growth. In 2025, the company expects its SHOP segment's same-store cash NOI to rise between 11.0% and 16.0%.

Amid favorable demographics and growing outpatient trends, Ventas is committed to capitalizing on this upside within its outpatient medical and research (OM&R) portfolio. The growth in the population aged 65 years and above is driving the increase in outpatient visits as they make three times more visits to the doctor than the general population. Therefore, this portfolio is well-positioned to capitalize on this rising demand. In the OM&R portfolio, Ventas generated 2.1% same-store cash NOI growth in the fourth quarter of 2024. The company expects the OM&R portfolio's same-store cash NOI to grow in the range of 2.0-3.0% in 2025.

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.

Ventas has been making efforts to enhance its liquidity position and financial strength. As of Dec. 31, 2024, the company had approximately $3.8 billion of liquidity. 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, on-balance sheet financing and internal cash flow provides ample financial flexibility and is likely to support its growth endeavors.

The above-mentioned factors are expected to continue the positive trend in the stock.

Risks Likely to Affect VTR’s Positive Trend

Competition from national and local operators limits its power to raise rents and drive profitability. Dependence on a few tenants poses key concerns for Ventas.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Welltower WELL and Sabra Healthcare REIT SBRA, each carrying a Zacks Rank of #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 Welltower’s 2025 FFO per share is pegged at $4.88, which indicates year-over-year growth of 13%.

The Zacks Consensus Estimate for Sabra’s full-year FFO per share is $1.49, which indicates an increase of 3.5% from the year-ago period.

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

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