Brookdale Senior Living continues to slap investors and analysts around, missing consensus revenue targets for the fourth quarter in a row. We know, never rely on “consensus” anything, but the company seems to always disappoint, even now when everything should be rallying. Investors did not like what they heard and sent shares tumbling by 10% in early trading, with some recovery later in the morning.
It was not all bad news, of course. Occupancy continues to rise, with weighted average occupancy over 80% in the second quarter, a key benchmark, and same-community occupancy rose to 80.7% in the second quarter, up 190 basis points year over year and up 70 basis points sequentially. Despite these gains, same-community revenues dropped by 0.3% sequentially, same-community operating income and operating margin fell by 3.8% and 100 basis points, respectively, and RevPOR declined. At some point, these occupancy gains will be providing a nice cash flow boost, but costs have got to get under control, and we do expect to see several cost areas rise because of the Trump tariffs.
The leased portfolio saw a sequential 130-basis point decline in operating margin even though occupancy increased marginally by 10 basis points from the first quarter. The lease coverage is a weak 1.11x. It may not matter soon as many of Brookdale’s Ventas leases will be transitioned out later this year, and it will be helpful to see what is left and how they are performing. Some other good news is that the number of communities with census below 70% is dropping, as it should. That has been a real drag on the company. Even so, after listening to the earnings call, Brookdale’s recovery is going to take some time.
