Why Shares of Medical Properties Trust Slumped on Tuesday

Medical Properties Trust is a real estate investment trust (REIT) that specializes in hospital properties. The company’s second-quarter report showed a revenue decline and a net income loss.

Revenue was listed as $400.2 million, down 15.6%, year over year. The REIT had a net loss of $42 million in the quarter, or an earnings per share (EPS) loss of $0.07, compared to net income of $190 million or $0.32 in EPS in the same period a year ago. The decline was due in part to the early termination of Steward Health Care System’s leases of five Utah hospitals in May that the company has now leased to CommonSpirit, as well as a rent write-off of $95 million.

Based in part on the second-quarter results, Medical Properties Trust changed its annual guidance. It now says it expects normalized funds from operation (NFFO) to be between $1.53 to $1.57 per share, compared to a broader forecast of between $1.50 and $1.61 in the first quarter, and EPS to be between $0.33 and $0.37, an improvement from the earlier range of $0.06 to $0.17.

Not all the news in the report was bad. The company’s quarterly NFFO, which is a better metric than net income for a REIT, was up 3.6% year over year to $285 million, and NFFO per share was $0.48, compared to $0.46 in the same period last year. The company also sold three acute-care hospitals in July to Prime Healthcare for roughly $100 million.

Getting struggling Steward off the books will help the company’s margins. One other positive is that despite the declining numbers, the REIT didn’t say it was cutting its quarterly dividend, which at the moment is $0.29, delivering a yield of around 13%. However, it is concerning that Medical Properties Trust didn’t even mention its dividend.