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CareTrust REIT, Inc. (CTRE) Reports Q4-16

|Includes: CareTrust REIT (CTRE)

For blog posted data on Health Care REITs, I will be posting data (as it comes in) without much context. This would logical result in a less enlightening reading experience compared to post in other sectors. Remember that I am not compensated for blog posts. Fill the comment section up with requests for context and meaning and you will discourage the posting of future data in this sector. I expect this condition will change over time.

To have the right context - you need to see a lot of individual updates. After you have that context - the conclusion is pretty clear that CTRE sells at a yield that is too dang low, but that is mostly due to very strong dividend coverage. Specifically, the yield on the equity CTRE of (68/1538) 4.42% is relatively out of line with the cash yield on that properties that it owns. But, the Price/FFO numbers provides a bit of comfort with its below sector average number. CTRE is a blend of senior housing (like HCN and VTR) and skilled nursing (like OHI and SBRA). The credit rating is relatively bad. It is still new - lacking a track record.

Some data points:

During 2016 CTRE invested approximately $288.0 million (inclusive of transaction costs) at a blended initial cash yield of 9.0%

During 2016 CTRE garnered multiple credit rating increases, with Moody's raising both its corporate credit rating on CareTrust REIT and its rating on CareTrust REIT's 5.875% Senior Unsecured Notes to B1 (from B2), each with a stable outlook, and Standard & Poor's raising both its corporate credit rating on CareTrust to B+ (from B), with a stable outlook, and its issue rating on CareTrust REIT's 5.875% Senior Unsecured Notes to BB- (from B+).

The FFO projections from NASDAQ (Yahoo Finance is posting earnings data that is not FFO)

Fiscal
Year End
Consensus
FFO* Forecast
High FFO*
Forecast
Low FFO*
Forecast
Number of
Estimates
Over the Last 4 Weeks
Number of Revisions
Up Down
Dec 2017 1.21 1.24 1.18 4 0 0
Dec 2018 1.26 1.34 1.18 2 0 0

the Yahoo Finance revenue projections:

  Current Qtr. Next Qtr. Current Year Next Year
No. of Analysts 5 5 7 5
Avg. Estimate 28.41M 29.26M 122.22M 137.42M
Low Estimate 26.56M 26.86M 108.44M 112.73M
High Estimate 30.9M 32.7M 137M 163M
Year Ago Sales 23.63M 25.7M 104.68M 122.22M

My spreadsheet:

CTRE CareTrust REIT Q4-16 Q3-16 Q2-16 Q1-16 Q4-15 Q3-15 Q2-15 Q1-15 Q4-14 Q3-14 Q2-14
  FFO 17.158 16.055 15.498 12.772 12.021 6.523 7.934 7.631 5.995 7.329
  Normalized FFO 17.160 16.258 15.498 13.098 12.021 7.731 7.934 7.631 6.210 7.359
  FAD 17.986 16.877 16.496 13.579 12.999 7.504 8.783 8.554 6.702 7.862
  Normalized FAD 17.986 17.080 16.496 14.085 12.999 8.713 8.783 8.554 6.917 7.892
  Share count 61.028 57.739 57.667 48.258 47.802 39.125 31.462 31.446 24.586 22.436
  Normalized FAD/share 0.2947 0.2958 0.2860 0.2919 0.2719 0.2227 0.2792 0.2720 0.2813 0.3517
  Norm FFO guidance 1.12 1.09 1.09 1.07 1.06* 0.92 none 0.99 0.97* 0.74 1.24
  Norm FAD guidance 1.19 1.16 1.16 1.15 1.16* 1.02 none 1.07 1.07* 0.80 1.34
  Debt 449.716 457.426 442.144 358.856 393.905 400.696 391.854 357.520 350.773 358.867
  Debt/share 7.3690 7.9223 7.3204 7.4362 8.2403 10.2414 12.4548 11.3693 14.2672 15.9951
  EBITDA 23.355 22.365 21.400 19.413 13.904 15.406 14.228 13.904 12.268 13.302
  Annualization of EBITDA 93.420 89.460 85.600 77.652 55.616 61.624 56.912 55.616 49.072 53.208
  Debt/EBITDA 4.81x 5.12x 5.17x 4.62x 7.08x 6.50x 6.89x 6.43x 7.15x 6.74x
  Investments 907.790 822.716 785.219 730.948 654.091 659.783 467.502 456.596 443.747 503.866
  Debt/Investments 49.5% 55.6% 56.3% 49.1% 60.2% 60.7% 83.8% 78.3% 79.0% 71.2%
  Norm. FFO/ investments 7.92% 7.81% 7.89% 7.17% 7.35% 4.69% 6.79% 6.69% 5.60% 5.84%
  Revenues 28.243 27.106 25.701 23.629 22.632 17.985 17.376 16.958 16.077 15.884
  Revenue/Investments 12.44% 13.18% 13.09% 12.93% 13.84% 10.90% 14.87% 14.86% 14.49% 12.61%
  Income 8.388 7.832 7.631 5.502 5.003 0.727 2.266 2.038 0.630 1.967
  Income/Investments 4.00% 3.81% 3.89% 3.01% 3.06% 1.19% 1.94% 1.78% 0.57% 1.56%

One should be able to see that analyst projections are well ahead of 2017 company guidance - which is a bad thing. Q4-16 Revenue was right on target.

What I see in the data - A relatively low amount of FFO growth for a company with so much FFO retention. A REIT that sell as if it were high in senior housing when it is a blend of that type and the higher yielding SNFs like OHI and SBRA.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.