The Irvine, CA-based company is a real estate investment trust serving the healthcare industry. Jefferies maintained its "hold" rating on the stock.
"We are lowering our outlook on senior housing in light of rising concern about supply," Jefferies analysts said in a note. "We also have concerns about skilled nursing as occupancy growth remains challenging and government reimbursement risk is on the rise."
Shares of HCP could face a downside of 20% to 60% if supply resembles levels seen in the last bust, the firm added.
"With developers still going full steam ahead, we worry things get worse before they get better and oversupply creeps into more markets over the next 12-18 months," Jefferies continued.
HCP stock was up by 0.61% to $39.64 on Thursday afternoon.
Separately, TheStreet Ratings team rates HCP INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
We rate HCP INC (HCP) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- HCP's revenue growth has slightly outpaced the industry average of 9.8%. Since the same quarter one year prior, revenues rose by 12.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for HCP INC is rather high; currently it is at 58.08%. Regardless of HCP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 26.61% trails the industry average.
- Net operating cash flow has remained constant at $363.92 million with no significant change when compared to the same quarter last year. Despite stable cash flow, HCP INC's cash flow growth rate is still lower than the industry average growth rate of 16.24%.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, HCP INC's return on equity is below that of both the industry average and the S&P 500.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, HCP has underperformed the S&P 500 Index, declining 9.83% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
- You can view the full analysis from the report here: HCP