Welltower Earnings: Revenue Growth Outpacing Expense Growth Drives Higher-Than-Expected NOI Growth

No-moat Welltower reported fourth-quarter earnings that were slightly better than our expectations, leading us to reaffirm our $125 fair value estimate. Senior housing same-store occupancy increased 120 basis points sequentially to 87.1%, bringing the occupancy level back in line with the level reported in the first quarter of 2020. Rental rates were up 4.9% year over year, leading to same-store revenue growth of 8.8%. Meanwhile, same-store operating expenses only increased 4.1%, leading to same-store net operating income growth of 23.9%, slightly higher than our estimate of 19.4% growth in the fourth quarter. Additionally, the triple-net senior housing portfolio saw 5.1% same-store NOI growth, the medical office portfolio saw 2.0% same-store NOI growth, and the skilled nursing portfolio saw 2.6% same-store NOI growth. Combined, total company same-store NOI growth was 12.8%, slightly better than our estimate of 10.1% growth. Welltower reported normalized funds from operations of $1.13 per share in the quarter, which, while it was 17.7% higher than the $0.96 figure the company reported in the fourth quarter of 2023, was a penny below our $1.14 estimate.