Ahead of the Bell: Sabra Health Care upgraded

Analyst upgrades shares of Sabra Health Care following slump, expects more deals

Associated Press

NEW YORK (AP) -- A Jefferies & Co. analyst upgraded Sabra Health Care on Wednesday, saying shares of the real estate investment trust should recover from their slide over the last few months.

Sabra owns the real estate assets of Sun Healthcare Group, a company that runs skilled nursing facilities and assisted living centers. Analyst Omotayo Okusanya raised his rating to "Buy" from "Hold' and said Sabra has done well because it has diversified its business and is less reliant on Sun, its former parent company. He said Sabra should be able to continue making deals without being forced to raise cash and dilute the value of its shares.

Sabra, of Irvine, Calif., owns and invests in real estate used by the health care industry. The company had 120 properties on June 30, including 96 skilled nursing and post-acute care facilities. In July Sabra agreed to buy up to 10 facilities being built by Meridian Realty Advisors in a deal valued at $100 million.

Sun Healthcare was acquired by Genesis Healthcare in December.

Sabra Health Care REIT Inc. shares closed at $22.49 on Tuesday. The company lowered its annual guidance May 23 and the stock is down 29.6 percent since then.

Okusanya said he thinks Sabra will report higher funds from operations, a key measure of real estate trust performance. He expects the company to report FFO of $2.04 per share in 2014, up from his previous estimate of $1.89 per share. Funds from operations adds such items as amortization and depreciation back to net income. It is considered a key measure of strength for REITs because it provides a more accurate picture of cash performance.

FactSet says analysts expect Sabra to report FFO of $2.03 per share in 2014.

The analyst trimmed his price target to $26 per share from $27. Sabra shares have traded between $32.40 and $19.54 over the last 12 months.

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