Jones Lang LaSalle JLL provided a business update and set financial targets for 2025 in its Investor Briefing on Nov 16, 2022.
Management anticipates fee revenues for 2025 to lie between $10 billion and $11 billion, while the adjusted EBITDA margin is estimated to come in the range of 16-19%.
The company expects to operate within a net debt to adjusted EBITDA leverage range of 0.0-2.0X.
Amid the prevailing macroeconomic uncertainty, this Chicago-based real estate services company reported dismal third-quarter 2022 earnings. The adjusted earnings per share (EPS) came in at $3.40, lagging the Zacks Consensus Estimate of $4.52. The reported figure declined 25.4% from the prior-year quarter’s $4.56.
Its transaction-based businesses, specifically the Capital Markets and Leasing under Markets Advisory, were hit by higher interest rates and rapid changes in the economic sentiment globally.
The quarterly revenues totaled $5.17 billion, falling 5.9% from the year-ago quarter’s $4.88 billion. The Zacks Consensus Estimate for the same was pegged at $5.19 billion. The fee revenue for the third quarter came in at $2.04 billion, down from $2.05 billion recorded in the prior-year quarter.
JLL’s Capital Markets segment reported revenues and fee revenues of $595.2 million and $579.1 million, respectively, decreasing 12.5% and 9.4% (in USD) year over year.
Higher interest rates have led clients to adopt a cautious approach, and underwriting assumptions have become more restrictive. Further, the widening bid-ask spreads and investors’ desire for greater price discovery is causing a delay in the closing timeline for transactions. This is likely to impact the profitability of JLL’s transaction-based businesses in the near term.
Shares of this Zacks Rank #5 (Strong Sell) company have lost 14.2% in the past six months compared with its industry’s decline of 7.7%.
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Nonetheless, JLL’s data-driven and experiential technology platform has been providing a competitive edge and leading to increased client engagements, positioning it well for growth.
Per Christian Ulbrich, CEO of JLL, “The commercial real estate industry is being shaped by the rapid adoption of technology and an increased focus on sustainability. JLL is uniquely positioned to take advantage of these trends and shape the future of real estate for a better world.”
To boost its sustainable building capabilities, in July 2022, JLL acquired Envio Systems, a Berlin-based technology company. With this buyout, JLL will be able to solve its clients' problems better, faster and more cost-effectively.
In August 2021, JLL acquired artificial intelligence firm Skyline AI. Through this, the company provides its client with tools to predict property values and identify new investment opportunities and help them make decisions as to when to raise the rent, renovate or sell the property.
JLL maintains a solid balance-sheet position with ample financial flexibility. As of Sep 30, 2022, the company had corporate liquidity of $2.1 billion and net leverage of 1.1X. Moreover, it amped up the borrowing capacity of its credit facility from $2.75 billion to $3.35 billion. Such efforts poise JLL well to capitalize on long-term growth opportunities.
Stocks to Consider
Some better-ranked stocks from the broader real estate industry are Kennedy-Wilson KW and Vonovia VONOY, both carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Kennedy-Wilson’s 2022 EPS has moved 4% upward in the past week to $1.82.
The Zacks Consensus Estimate for Vonovia’s current-year EPS has moved 3.8% northward in the past week to $1.26.
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