On Monday, Omega Healthcare Investors (NYSE:OHI) received an upgraded rating from BMO Capital from Market Perform to Outperform, with the price target maintained at $45.00. The upgrade comes with an optimistic view on the skilled nursing facilities (SNFs) sector, anticipating a beneficial supply and demand scenario and the potential for reduced regulatory pressures following the Biden administration.
The firm's positive stance is further supported by expectations of robust accretive acquisitions, projecting estimates slightly above consensus. BMO Capital has increased its assumption for Omega Healthcare's 2025 acquisitions to $750 million, which is higher than the average market expectations, indicating potential upside risk.
The analyst highlighted Omega Healthcare's strong financial position, noting its net debt to EBITDA ratio at 4.2x, which is considered healthy and supportive of future earnings growth. Additionally, the company's weighted average cost of capital (WACC) is robust, which is expected to drive earnings.
Omega Healthcare's diversified tenant base, with the top ten tenants comprising 58% of rents, is seen as a mitigating factor against individual credit risks. BMO Capital has identified Omega Healthcare as its top pick in the SNF sector for 2025, following a period of neutrality on CareTrust REIT (NYSE:CTRE) after its post-Physicians American Corporation activities.
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