Welltower Inc WELL

Welltower Earnings: Small Occupancy Dip, but Senior Housing Same-Store NOI Higher Than Expected

Welltower reported first-quarter results that were slightly better than our expectations, leading us to reaffirm our $107 fair value estimate for the no-moat company. Senior housing same-store occupancy fell 10 basis points sequentially to 83.4%, the first quarter-over-quarter decline since the first quarter of 2021, though we will note that the first quarter is usually one of the hardest quarters to increase occupancy and that year-over-year occupancy was still up 340 basis points. Rental rates increased by 4.8%, leading to same-store revenue growth of 10.3% that was slightly ahead of our 9.6% estimate. Operating expenses were not up quite as much, increasing 5.7% in the quarter, so same-store net operating income, or NOI, increased 25.5% for the segment, ahead of our 21.2% estimate. Welltower also reported same-store NOI growth of 3.8% for the triple-net segment, 3.1% for the skilled nursing segment, and 2.0% for the medical office segment. Combined, total company same-store NOI was 12.9% in the first quarter, better than our expectations of 9.8% growth. As a result, Welltower reported normalized funds from operations of $1.01 per share for the quarter, which was five cents better than our $0.96 estimate and 16 cents better than the $0.85 figure reported in the first quarter of 2023.