Why Sabra Health Care REIT Stock Soared Today
Key Points
The company should soon find new tenants for 26 of its properties.
These incoming tenants will pay almost 30% more in rent.
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One of the healthier real estate investment trusts (REITs) on the stock market Tuesday was Sabra Health Care REIT (NASDAQ: SBRA). Investors pushed the company's shares up by more than 10% that trading session, on several positive news items.
Rebalancing
The source of that investor optimism was an operational and financial update Sabra issued in the morning.
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The company said it has entered into letters of intent to retenant the 26 properties leased to senior living and post-acute care specialist Avamere. Sabra added that when these changes occur, the total rent for the portfolio should be $53 million annually, nearly 30% higher than the $41 million the REIT previously collected.
The moves are expected to finalize in the second half of this year.
The company also said that it has arranged a deal to retire a $300 million mortgage loan it provided to Recovery Centers of America (RCA). Under its terms, RCA will pay $200 million entirely in cash. Although this represents a significant discount, Sabra is using the proceeds wisely -- they are to be utilized to reduce the balance on the REIT's revolving line of credit.
Good news about guidance
The best news in all of this is that the changes led Sabra to raise its guidance for the entirety of 2026. The company now expects headline net income of $0.37 to $0.39 per share, and normalized, adjusted funds from operations (AFFO; a critical profitability metric for REITs) of $1.59 to $1.61 per share.
While the net income forecast is notably lower than the preceding guidance of $0.60 to $0.64 per share, it reflects one-time costs Sabra will incur in its actions. On the other hand, the normalized AFFO estimate is higher than the previous $1.55 to $1.59.
It seems to me that Sabra is clearing the decks for future growth and tidying its balance sheet. That in itself is good news, so I'd be bullish on the stock too.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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