Monday, May 9, 2016

HCP Inc Earnings

Today HCP Inc reported Q1 FFO of $0.68 on revenues of $640.7 million.  FAD came in at $0.66. The company made a big announcement that it will be spinning off it's HCR ManorCare assets which you can read here. The shares shot up almost 7% today on the news hitting a high of $36.90. Here is the 2016 outlook.

For full year 2016, we expect: FFO per share to range between $2.76 and $2.82; FFO as adjusted per share to range between $2.77 and $2.83; FAD per share to range between $2.65 and $2.71; and EPS to range between $1.80 and $1.86. In addition, we expect 2016 SPP Cash NOI to increase between 1.5% and 2.5%. Excluding HCRMC, we expect 2016 SPP Cash NOI to increase between 2.3% and 3.3%. These estimates do not reflect the potential impact of the spin-off transaction involving our HCRMC real estate portfolio or unannounced future transactions. Refer to the "Projected Future Operations" and "Projected SPP Cash NOI" sections of this release for additional information regarding these estimates.

The HCR ManorCare spinoff is very interesting, and I'm not sure many people saw this coming.  Last year the company announced they were having legal issues with Medicare billing and reimbursements. Secondly they took a $1 billion impairment charge related the company operations and assets.  I think the company was looking to separate itself from these issues and focus on more lucrative opportunities. These assets have been a steady producer for the company over the years, but I think given the current outlook they see better opportunities.  Current shareholders will receive shares in the new company.  I'll have to figure out if I'll keep both, sell one of the companies, or sell both. 

Here is what CEO  Lauralee Martin had to say.

"We believe this transaction gives HCP the ability to re-confirm itself as a blue-chip, innovative and relationship-oriented healthcare REIT. Post spin, HCP will own a stable, private-pay portfolio that has a track record of delivering consistent, attractive returns. HCP will be able to sharpen its focus on high-growth healthcare sectors and, with a cost of capital benefiting from the stability and growth profile of these strong sectors, we will be positioned to achieve accretive new investment growth. The transaction also gives our shareholders ownership of a separate company structured with the tools and flexibility to maximize the value of its assets."

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