Stock Analysis

Ventas, Inc. Just Recorded A 26% EPS Beat: Here's What Analysts Are Forecasting Next

  •  Updated
NYSE:VTR
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Investors in Ventas, Inc. (NYSE:VTR) had a good week, as its shares rose 3.3% to close at US$52.39 following the release of its yearly results. It looks like a credible result overall - although revenues of US$3.8b were what the analysts expected, Ventas surprised by delivering a (statutory) profit of US$1.17 per share, an impressive 26% above what was forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

See our latest analysis for Ventas

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NYSE:VTR Earnings and Revenue Growth February 22nd 2021

Taking into account the latest results, the eight analysts covering Ventas provided consensus estimates of US$3.69b revenue in 2021, which would reflect a discernible 2.6% decline on its sales over the past 12 months. Statutory earnings per share are expected to plummet 67% to US$0.38 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$3.69b and earnings per share (EPS) of US$0.41 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.

It might be a surprise to learn that the consensus price target was broadly unchanged at US$48.10, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Ventas, with the most bullish analyst valuing it at US$57.00 and the most bearish at US$35.00 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Ventas shareholders.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with the forecast 2.6% revenue decline a notable change from historical growth of 3.3% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 5.6% next year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Ventas is expected to lag the wider industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Ventas. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse than the wider industry. The consensus price target held steady at US$48.10, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Ventas going out to 2023, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 4 warning signs for Ventas you should be aware of, and 2 of them are concerning.

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What are the risks and opportunities for Ventas?

Ventas, an S&P 500 company, operates at the intersection of two powerful and dynamic industries – healthcare and real estate.

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Rewards

  • Trading at 19.6% below our estimate of its fair value

  • Earnings are forecast to grow 54.29% per year

Risks

  • Interest payments are not well covered by earnings

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