What happened

Shares of Diversified Healthcare Trust (DHC -0.35%) were skyrocketing 54.8% higher as of 11:17 a.m. ET on Thursday. The huge gain came after the company announced its fourth-quarter results following the market close on Wednesday.

Diversified Healthcare Trust reported total revenue in the fourth quarter of $336.9 million, up slightly from revenue of $336.7 million in the prior-year period. This result came in well above the consensus estimate of $330.1 million.

The healthcare REIT posted a net loss in Q4 of $65.3 million, or $0.27 per share, compared to positive earnings of $365.6 million, or $1.54 per share, in the prior-year period. The average analysts' estimate was for a net loss in Q4 of $0.26 per share.

Arguably the most important number for Diversified Healthcare Trust, though, was its normalized funds from operations (FFO) of $8.1 million, or $0.03 per share. This reflected significant improvement from the normalized FFO loss of $0.07 per share in the fourth quarter of 2021. It was also much better than the consensus estimate of a loss of $0.01 per share.

So what

Perception is everything in investing. After Diversified Healthcare Trust's Q4 update, the perception about the company's outlook is much better than it has been.

The biggest factor behind Diversified Healthcare Trust's better-than-expected performance is improvement in the company's SHOP (senior housing operating portfolio) segment. Occupancy for the segment rose 380 basis points, with average monthly rates jumping nearly 9% year over year.

Now what

The healthcare REIT's future could be brighter now. Last month, Diversified Healthcare Trust announced an amendment to its credit facility that provides some covenant relief. This move will enable the company to invest more in its properties and potentially lead to an even stronger financial performance from its SHOP segment in the coming quarters.