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Welltower (WELL) Q2 Earnings call transcript Jul 30, 2024

AInvestWednesday, Jul 31, 2024 4:04 pm ET
2min read

The Welltower Inc. recently released its second-quarter earnings report for 2024, highlighting a remarkable increase in bottom-line growth and a significant boost in capital allocation priorities. The company's normalized Funds from Operations (FFO) per share rose by 17%, reaching over 19% when adjusted for prior year subsidies. This growth was driven by the senior housing portfolio, which posted a seventh consecutive quarter of same-store NOI growth in excess of 20%.

Senior Housing Portfolio's Exceptional Performance

Welltower's senior housing portfolio has been a significant contributor to the company's success, with same-store NOI growth exceeding 20% for the seventh consecutive quarter. This achievement is particularly impressive given the challenges faced by the senior housing industry during the pandemic. The portfolio's unit revenue growth came in at 5.3%, while unit expense growth was up just 1%, resulting in a substantial margin expansion of 290 basis points year-over-year.

Strategic Capital Allocation and Acquisitions

Welltower's capital allocation strategy has been a key factor in its success. The company has announced approximately $5 billion in acquisitions since the NAREIT conference in June, with the senior housing space being the primary focus. This aggressive acquisition strategy is expected to further bolster the company's presence in the senior housing sector and capitalize on the unprecedented growth opportunities in this area.

Outlook and Future Growth

Looking ahead, Welltower is optimistic about the future prospects of the senior housing business. The aging population, particularly the baby boomer generation, is expected to significantly increase demand for senior housing services. Additionally, the company's focus on enhancing long-term growth through capital-light transactions and platform initiatives is expected to yield substantial returns.

Investor Confidence and Market Reactions

The strong financial performance and strategic moves made by Welltower have not gone unnoticed. Both Moody's and S&P have revised their outlooks on the company's credit ratings to positive, reflecting the confidence in Welltower's financial health and growth prospects. This positive sentiment has been mirrored in the market, with the company's stock price showing steady growth throughout the year.

Challenges and Opportunities

Despite the promising outlook, Welltower faces challenges, particularly in the senior housing space. The lack of new construction and the difficulty in securing financing for new projects present significant hurdles. However, these challenges also create opportunities for Welltower to capitalize on the undersupply of senior housing assets and the attractive economics of the sector.

Conclusion

Welltower's second-quarter earnings report for 2024 underscores the company's strong financial health and strategic positioning in the senior housing sector. With a focus on capital allocation, strategic acquisitions, and operational enhancements, Welltower is well-positioned to capitalize on the growing demand for senior housing services and the opportunities presented by the aging population. As the company continues to navigate the challenges and opportunities of the senior housing market, investors and analysts will closely watch its performance and growth trajectory.

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