Sabra Health Care REIT, Inc. (SBRA) Bundle
Understanding Sabra Health Care REIT, Inc. (SBRA) Revenue Streams
Understanding Sabra Health Care REIT, Inc.’s Revenue Streams
The primary revenue sources for Sabra Health Care REIT, Inc. include rental and related revenues, resident fees and services, and interest and other income. Below is a detailed breakdown of these revenue streams.
Revenue Breakdown by Source
| Revenue Source | Q3 2024 (in millions) | Q3 2023 (in millions) | Change (%) |
|---|---|---|---|
| Rental and Related Revenues | $94.6 | $93.1 | 1.6% |
| Resident Fees and Services | $73.7 | $59.7 | 23.5% |
| Interest and Other Income | $9.7 | $8.8 | 10.2% |
| Total Revenues | $178.0 | $161.6 | 10.1% |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, the total revenues reached $520.9 million, compared to $484.1 million for the same period in 2023, reflecting a year-over-year growth rate of 7.6%.
Contribution of Different Business Segments to Overall Revenue
During the nine months ended September 30, 2024, the contributions from different segments were as follows:
- Rental and Related Revenues: $285.4 million
- Resident Fees and Services: $207.7 million
- Interest and Other Income: $27.7 million
This indicates that rental and related revenues accounted for approximately 54.8% of total revenue, while resident fees and services contributed about 39.8%.
Significant Changes in Revenue Streams
There were notable changes in the revenue streams during 2024:
- Rental and Related Revenues: Increased by $2.2 million in the nine months ended September 30, 2024, due to properties acquired after January 1, 2023.
- Resident Fees and Services: Increased by $32.8 million compared to the previous year, driven by higher occupancy rates and new facilities added to the managed portfolio.
- Interest and Other Income: Grew by $1.8 million, attributed to higher earnings from loans receivable investments.
Overall, the revenue growth reflects the company's strategic focus on expanding its portfolio and enhancing operational efficiencies.
A Deep Dive into Sabra Health Care REIT, Inc. (SBRA) Profitability
Profitability Metrics
This section delves into the profitability metrics of the company, focusing on gross profit, operating profit, and net profit margins.
Gross Profit, Operating Profit, and Net Profit Margins
For the nine months ended September 30, 2024:
- Gross Profit: $285.4 million
- Operating Profit: $80.9 million
- Net Profit Margin: 9.4%
For the nine months ended September 30, 2023:
- Gross Profit: $283.2 million
- Operating Profit: $0.2 million
- Net Profit Margin: (1.2%)
Trends in Profitability Over Time
The following table illustrates the trends in profitability metrics over the last two years:
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Gross Profit | $279.0 million | $283.2 million | $285.4 million |
| Operating Profit | $25.0 million | $0.2 million | $80.9 million |
| Net Profit Margin | 8.9% | (1.2%) | 9.4% |
Comparison of Profitability Ratios with Industry Averages
As of September 30, 2024, the company’s profitability ratios compared with industry averages are as follows:
- Gross Profit Margin: 33.5% (Industry Average: 30.0%)
- Operating Profit Margin: 9.4% (Industry Average: 6.0%)
- Net Profit Margin: 9.4% (Industry Average: 5.0%)
Analysis of Operational Efficiency
Operational efficiency has shown significant improvement, as evidenced by the following metrics:
- Cost Management: Total expenses decreased from $409.0 million in 2023 to $436.8 million in 2024, despite increased operational demands.
- Gross Margin Trends: The gross margin increased from 28.9% in 2023 to 33.5% in 2024.
Additionally, the company has implemented cost-saving measures that have effectively lowered operating expenses, enhancing overall profitability.
Debt vs. Equity: How Sabra Health Care REIT, Inc. (SBRA) Finances Its Growth
Debt vs. Equity: How Sabra Health Care REIT, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the company reported total liabilities of $2,336,978 thousand. The breakdown includes secured debt of $46,623 thousand and senior unsecured notes totaling $1,750,000 thousand.
Debt-to-Equity Ratio
The debt-to-equity ratio stands at approximately 0.85, calculated using total liabilities of $2,336,978 thousand and total equity of $2,744,844 thousand as of September 30, 2024. This ratio is below the industry average of 1.0, indicating a relatively conservative leverage position compared to peers in the real estate investment trust (REIT) sector.
Recent Debt Issuances and Credit Ratings
In 2024, the company issued senior unsecured notes with the following details:
- 5.125% senior unsecured notes due August 15, 2026: $500,000 thousand
- 5.88% senior unsecured notes due May 17, 2027: $100,000 thousand
- 3.90% senior unsecured notes due October 15, 2029: $350,000 thousand
- 3.20% senior unsecured notes due December 1, 2031: $800,000 thousand
The weighted average effective interest rate on these notes is approximately 4.01%.
The company maintains a credit rating of Baa3 from Moody's, indicating a moderate credit risk.
Balancing Debt Financing and Equity Funding
As of September 30, 2024, the total equity was reported at $2,744,844 thousand, reflecting a strategic balance between debt and equity financing. The company raised $71.4 million through an ATM program and $58.8 million from its Revolving Credit Facility in the past year.
| Debt Type | Principal Amount (in $ thousands) | Interest Rate | Maturity Date |
|---|---|---|---|
| Secured Indebtedness | 46,623 | 2.85% | May 2031 - August 2051 |
| 2026 Notes | 500,000 | 5.125% | August 15, 2026 |
| 2027 Notes | 100,000 | 5.88% | May 17, 2027 |
| 2029 Notes | 350,000 | 3.90% | October 15, 2029 |
| 2031 Notes | 800,000 | 3.20% | December 1, 2031 |
The proactive management of debt and equity funding reflects the company's strategy to finance growth while maintaining financial stability and flexibility.
Assessing Sabra Health Care REIT, Inc. (SBRA) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
As of September 30, 2024, the current ratio for the company was approximately 1.16, indicating that it has sufficient assets to cover its short-term liabilities. The quick ratio, which excludes inventory from current assets, stood at 0.91, suggesting potential liquidity concerns as it is below the standard benchmark of 1.0.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, was reported at $146.8 million, reflecting a positive trend compared to $120.5 million as of December 31, 2023. This increase indicates improved operational efficiency and cash management.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, was $230.6 million, compared to $221.8 million for the same period in 2023. This increase was primarily driven by higher rental income and fewer non-cash adjustments. The cash flow from investing activities showed a net outflow of $127.6 million, largely due to $112.2 million spent on acquisitions. Cash flows from financing activities reflected a net outflow of $80.6 million, primarily from dividends paid totaling $209.2 million.
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $230.6 | $221.8 |
| Investing Activities | ($127.6) | $164.9 |
| Financing Activities | ($80.6) | ($165.3) |
Potential Liquidity Concerns or Strengths
Despite the positive trends in working capital and operating cash flows, the quick ratio indicates a potential liquidity concern, as it is below the ideal threshold. The company has approximately $947.8 million in liquidity, which includes $63.0 million in unrestricted cash and $847.4 million available under its revolving credit facility. This substantial liquidity position provides a buffer against short-term obligations.
Furthermore, the company has a commitment for future capital expenditures of $15 million, which may impact liquidity if cash flows do not meet expectations. However, the ability to leverage its credit facility and ongoing rental income supports a stable financial outlook.
Is Sabra Health Care REIT, Inc. (SBRA) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of Sabra Health Care REIT, Inc. (SBRA) involves examining various financial metrics to determine whether the company is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for SBRA is 9.93, based on the latest earnings report showing a net income of $80,017,000 for the nine months ended September 30, 2024, and a weighted average number of common shares outstanding of 234,290,187.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.73, calculated using total equity of $2,744,844,000 and total shares outstanding of 236,586,805 as of September 30, 2024.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 8.78, derived from an enterprise value of $2,849,978,000 and EBITDA for the last twelve months amounting to $325,000,000.
Stock Price Trends
Over the last 12 months, SBRA's stock price has fluctuated between a low of $10.50 and a high of $16.00. The current stock price is approximately $13.50.
Dividend Yield and Payout Ratios
SBRA has a current dividend yield of 8.89%, with a quarterly dividend of $0.30 per share, resulting in an annual payout ratio of 87% based on the latest net income.
Analyst Consensus
According to recent analyst ratings, the consensus is a Hold, with a price target averaging around $14.00. Analysts are cautious, reflecting mixed sentiments due to market conditions and operational performance.
| Metric | Value |
|---|---|
| P/E Ratio | 9.93 |
| P/B Ratio | 1.73 |
| EV/EBITDA Ratio | 8.78 |
| 12-Month Price Range | $10.50 - $16.00 |
| Current Stock Price | $13.50 |
| Dividend Yield | 8.89% |
| Annual Payout Ratio | 87% |
| Analyst Consensus | Hold |
| Average Price Target | $14.00 |
Key Risks Facing Sabra Health Care REIT, Inc. (SBRA)
Key Risks Facing Sabra Health Care REIT, Inc.
Overview of Internal and External Risks
Sabra Health Care REIT, Inc. faces several internal and external risks impacting its financial health. Key risks include:
- Industry Competition: The healthcare real estate investment trust (REIT) sector is highly competitive, with various players vying for market share. As of September 30, 2024, the company operated 373 properties, which may limit its ability to increase market presence against larger competitors.
- Regulatory Changes: Changes in healthcare regulations, particularly those affecting reimbursement rates, can significantly impact revenue streams. For example, Medicare's Patient-Driven Payment Model (PDPM) adjustments may affect profitability.
- Market Conditions: Economic downturns can lead to reduced demand for healthcare services, impacting occupancy rates and rental income.
Operational, Financial, and Strategic Risks
Recent earnings reports highlight various operational and financial risks:
- Concentration of Credit Risk: The company monitors its portfolio to avoid significant tenant concentrations that could be adversely affected by economic changes. As of September 30, 2024, no tenant represented 10% or more of total revenues.
- Skilled Nursing Facility Reimbursement Rates: Approximately 39.6% of revenues were derived from skilled nursing facilities, making them vulnerable to changes in Medicare reimbursement rates, which saw a net increase of 4.0% effective October 1, 2023.
- Interest Rate Exposure: The company incurs significant interest expenses, totaling $87.2 million for the nine months ended September 30, 2024, up from $85.0 million for the same period in 2023.
Mitigation Strategies
The company has implemented several strategies to mitigate risks:
- Diversification: The portfolio is diversified across geographic locations and property types, which helps reduce concentration risk. As of September 30, 2024, the portfolio included properties in skilled nursing/transitional care, senior housing, and specialty hospitals.
- Liquidity Management: As of September 30, 2024, the company reported approximately $947.8 million in liquidity, including cash and available borrowings.
- Interest Rate Derivatives: The company uses interest rate swaps to manage exposure to fluctuating interest rates, with $430 million in U.S. dollar derivatives as of September 30, 2024.
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Industry Competition | High competition in healthcare REIT sector. | Potential decrease in market share and revenue growth. |
| Regulatory Changes | Changes in reimbursement policies can affect revenue. | Impact on profitability, particularly in skilled nursing facilities. |
| Market Conditions | Economic downturns can reduce demand for services. | Lower occupancy rates leading to decreased rental income. |
| Concentration of Credit Risk | No tenant represents 10% or more of revenues. | Reduced risk of revenue loss from tenant defaults. |
| Interest Rate Exposure | Interest expense of $87.2 million for nine months ended September 30, 2024. | Higher borrowing costs impacting net income. |
| Liquidity Management | Liquidity of $947.8 million as of September 30, 2024. | Ability to meet short-term obligations and capital expenditures. |
Future Growth Prospects for Sabra Health Care REIT, Inc. (SBRA)
Future Growth Prospects for Sabra Health Care REIT, Inc.
Analysis of Key Growth Drivers
The company has identified several key growth drivers, including strategic acquisitions, market expansions, and operational enhancements. In 2024, the company completed acquisitions amounting to $112.2 million for three facilities, contributing to its expanding portfolio of 373 properties across the U.S. and Canada.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, rental and related revenues reached $285.4 million, compared to $283.2 million for the same period in 2023, reflecting a growth of 1%. Additionally, resident fees and services increased to $207.7 million, up from $174.9 million, marking a 19% growth. Analysts project continued revenue growth driven by an increase in occupancy rates and the expansion of managed communities.
Strategic Initiatives or Partnerships that May Drive Future Growth
The company is pursuing partnerships with healthcare providers to enhance service offerings in its Senior Housing - Managed communities. As of September 30, 2024, the company has committed approximately $15 million for future capital improvements to enhance facility capabilities.
Competitive Advantages that Position the Company for Growth
Sabra's diversified portfolio of 373 properties provides a competitive edge, with a significant portion of revenues derived from skilled nursing facilities, which accounted for 39.6% of total revenues. The company's established relationships with operators and its ability to integrate new facilities into its existing portfolio further enhance its competitive positioning.
| Property Type | Number of Properties | Number of Beds/Units | Total Real Estate at Cost (in thousands) | Accumulated Depreciation (in thousands) | Total Real Estate Investments, Net (in thousands) |
|---|---|---|---|---|---|
| Skilled Nursing/Transitional Care | 233 | 26,330 | $2,992,712 | $(586,817) | $2,405,895 |
| Senior Housing - Leased | 39 | 3,319 | $512,037 | $(102,191) | $409,846 |
| Senior Housing - Managed | 68 | 6,588 | $1,487,337 | $(307,545) | $1,179,792 |
| Behavioral Health | 18 | 1,164 | $479,189 | $(76,518) | $402,671 |
| Specialty Hospitals and Other | 15 | 392 | $225,498 | $(51,517) | $173,981 |
| Total | 373 | 37,793 | $5,696,773 | $(1,124,588) | $4,572,185 |
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Article updated on 8 Nov 2024
Resources:
- Sabra Health Care REIT, Inc. (SBRA) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Sabra Health Care REIT, Inc. (SBRA)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Sabra Health Care REIT, Inc. (SBRA)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.