Shares of Ventas VTR have gained 11.7% in the past six months against the industry’s decline of 2%.

This healthcare real estate investment trust (REIT) is well-positioned to gain from its diverse portfolio of healthcare real estate assets in the key markets of the United States and the U.K. 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.

Image Source: Zacks Investment Research

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. With an expectation of a rising senior citizens population in the years ahead and muted new supply in its markets, VTR is well-prepared for a compelling multiyear growth opportunity.

Ventas’ senior housing portfolio is positioned in markets with favorable demographics, strong net absorption and affordability. Per its third-quarter 2024 earnings presentation, this healthcare REIT is experiencing healthy occupancy levels, backed by an acceleration in the SHOP demand. This is expected to drive the company’s top line. In 2024, Ventas expects its SHOP segment's same-store cash NOI to grow between 14-16%, up from the previous guided range of 13-16%.

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 people 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 third quarter of 2024. Ventas expects the OM&R portfolio's same-store cash NOI to grow in the range of 2.75-3.25% in 2024.

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 maintains a healthy balance sheet position. It has been making efforts to enhance its liquidity position and financial strength. As of Sept. 30, 2024, the company had approximately $4 billion of liquidity. It has substantially cleared 2024 remaining debt maturities. Its net debt to further adjusted EBITDA of 6.3X improved sequentially from 6.4X. 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.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Welltower WELL and Terreno Realty TRNO, each carrying a Zacks Rank #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 2024 FFO per share is pinned at $4.30, which suggests year-over-year growth of 18.1%.

The Zacks Consensus Estimate for Terreno’s 2024 FFO per share stands at $2.42, which indicates an increase of 9% from the year-ago period.

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Ventas, Inc. (VTR) : Free Stock Analysis Report

Terreno Realty Corporation (TRNO) : Free Stock Analysis Report

Welltower Inc. (WELL) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research