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Zillow (ZG) Up 6.1% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Zillow Group (ZG - Free Report) . Shares have added about 6.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Zillow due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Zillow Group Earnings & Revenues Top Estimates in Q3
Zillow Group reported third-quarter 2020 non-GAAP earnings of 37 cents per share, which beat the Zacks Consensus Estimate by 146.7%. In comparison, the company had reported a loss of 12 cents in the year-ago quarter.
Total revenues of $656.7 million also surpassed the Zacks Consensus Estimate by 15.3%.
However, revenues declined 12% on a year over year basis. Decline in Homes segment’s revenues on account of reduced inventory was a drag on the overall revenue performance. Reduced inventory stemmed from temporary cessation in home buying activities triggered by COVID-19 crisis in the first half of 2020.
Weakness in the Homes segment offset growth witnessed in Internet, Media & Technology or IMT division as well as Mortgage segment.
Nonetheless, Zillow Group remains optimistic about the business due to increases in demand for residential real estate. The company is banking on its platform capabilities like proprietary Zillow 3D Home technology that enables virtual home tours for Zillow-owned homes and virtual consultations from the company’s broker and Premier Agents to help prospective buyers amid movement restrictions due to the pandemic.
Revenue Detail
Homes segment revenues (28.5% of total revenues) were $187 million, down 51% year over year.
During the quarter, Zillow Group bought 808 homes and sold 583 through Zillow Offers, ending the quarter with 665 homes in inventory, up from 440 homes at the end of the second quarter.
Notably, Zillow Group had temporarily stopped home buying activity for Zillow Offers in all its markets due to the COVID-19 crisis. The company stated that operations for Zillow Offers have now resumed across all 25 markets which includes the recent expansion of Zillow Offers in Jacksonville, FL.
Zillow Offers revenues were $185.9 million, while Other Homes segment revenues were reported at $1.2 million. Notably, Other Homes segment revenues include revenues generated through Zillow Closing Services.
IMT segment revenues (63.3% of total revenues) increased 24% year over year and came in at $415.4 million during the reported quarter, mainly due to higher traffic.
Premier Agent revenues totaled $298.7 million, up 24% year over year.
Other IMT segment revenues surged 23% on a year-over-year basis to $116.7 million due to higher rental revenues.
Other IMT segment revenue comprises revenues generated by rentals, new construction and display, and, other marketing and business products and services to real estate professionals.
Mortgages segment revenues (8.2% of total revenues) increased 114% year over year to $54.2 million, on improving refinancing activity triggered by low mortgage rates.
Key Metrics
Traffic increased 21% year over year to 236.2 million average monthly unique users for the three months ended Sep 30, 2020. Visits were 2.8 billion, up 32% year over year.
Operating Details
Average Zillow Offers gross profit per home in the third quarter rallied 29% year over year to $14.7K. Moreover, the average return on homes sold before interest expense was a loss of $2.87K per home.
Adjusted EBITDA was $152.2 million, up 861% year over year. Homes adjusted EBITDA loss was $59.2 million, narrower than the year-ago quarter’s loss of $67.8 million. Mortgages adjusted EBITDA income was $15.9 million, against the year-ago quarter’s loss of $7.4 million. However, IMT reported adjusted EBITDA of $195.5 million, up 114.6% year over year.
Total consolidated costs and operating expenses declined 27% year over year to $580 million due to lesser number of homes sold under Zillow Offers owing to the temporary cessation in home buying activity due to COVID-19 crisis.
Zillow Group’s net income was reported at $39.6 million compared with net loss of $64.7 million reported in the year-ago quarter.
Balance Sheet
As of Sep 30, 2020, cash & cash equivalents and short-term investments were $3.8 billion compared with $3.5 billion, as of Jun 30, 2020.
For nine months ended Sep 30, 2020, cash flow generated from operating activities was $750.2 million compared with $670.3 million of net cash utilized in operating activities for the same period in 2019.
Guidance
For fourth-quarter 2020, total revenues are expected between $709 million and $748 million driven by strength in the IMT and Mortgage segments.
IMT segment revenues are expected in the range of $400-$415 million, with Premier Agent revenues between $300 million and $310 million.
Homes revenues are expected between $260million and $280 million. Mortgages revenues are anticipated in the $49-$53 million range.
Moreover, adjusted EBITDA is expected between $107 million and $131 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 98.36% due to these changes.
VGM Scores
At this time, Zillow has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Zillow has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Zillow (ZG) Up 6.1% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Zillow Group (ZG - Free Report) . Shares have added about 6.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Zillow due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Zillow Group Earnings & Revenues Top Estimates in Q3
Zillow Group reported third-quarter 2020 non-GAAP earnings of 37 cents per share, which beat the Zacks Consensus Estimate by 146.7%. In comparison, the company had reported a loss of 12 cents in the year-ago quarter.
Total revenues of $656.7 million also surpassed the Zacks Consensus Estimate by 15.3%.
However, revenues declined 12% on a year over year basis. Decline in Homes segment’s revenues on account of reduced inventory was a drag on the overall revenue performance. Reduced inventory stemmed from temporary cessation in home buying activities triggered by COVID-19 crisis in the first half of 2020.
Weakness in the Homes segment offset growth witnessed in Internet, Media & Technology or IMT division as well as Mortgage segment.
Nonetheless, Zillow Group remains optimistic about the business due to increases in demand for residential real estate. The company is banking on its platform capabilities like proprietary Zillow 3D Home technology that enables virtual home tours for Zillow-owned homes and virtual consultations from the company’s broker and Premier Agents to help prospective buyers amid movement restrictions due to the pandemic.
Revenue Detail
Homes segment revenues (28.5% of total revenues) were $187 million, down 51% year over year.
During the quarter, Zillow Group bought 808 homes and sold 583 through Zillow Offers, ending the quarter with 665 homes in inventory, up from 440 homes at the end of the second quarter.
Notably, Zillow Group had temporarily stopped home buying activity for Zillow Offers in all its markets due to the COVID-19 crisis. The company stated that operations for Zillow Offers have now resumed across all 25 markets which includes the recent expansion of Zillow Offers in Jacksonville, FL.
Zillow Offers revenues were $185.9 million, while Other Homes segment revenues were reported at $1.2 million. Notably, Other Homes segment revenues include revenues generated through Zillow Closing Services.
IMT segment revenues (63.3% of total revenues) increased 24% year over year and came in at $415.4 million during the reported quarter, mainly due to higher traffic.
Premier Agent revenues totaled $298.7 million, up 24% year over year.
Other IMT segment revenues surged 23% on a year-over-year basis to $116.7 million due to higher rental revenues.
Other IMT segment revenue comprises revenues generated by rentals, new construction and display, and, other marketing and business products and services to real estate professionals.
Mortgages segment revenues (8.2% of total revenues) increased 114% year over year to $54.2 million, on improving refinancing activity triggered by low mortgage rates.
Key Metrics
Traffic increased 21% year over year to 236.2 million average monthly unique users for the three months ended Sep 30, 2020. Visits were 2.8 billion, up 32% year over year.
Operating Details
Average Zillow Offers gross profit per home in the third quarter rallied 29% year over year to $14.7K. Moreover, the average return on homes sold before interest expense was a loss of $2.87K per home.
Adjusted EBITDA was $152.2 million, up 861% year over year. Homes adjusted EBITDA loss was $59.2 million, narrower than the year-ago quarter’s loss of $67.8 million. Mortgages adjusted EBITDA income was $15.9 million, against the year-ago quarter’s loss of $7.4 million. However, IMT reported adjusted EBITDA of $195.5 million, up 114.6% year over year.
Total consolidated costs and operating expenses declined 27% year over year to $580 million due to lesser number of homes sold under Zillow Offers owing to the temporary cessation in home buying activity due to COVID-19 crisis.
Zillow Group’s net income was reported at $39.6 million compared with net loss of $64.7 million reported in the year-ago quarter.
Balance Sheet
As of Sep 30, 2020, cash & cash equivalents and short-term investments were $3.8 billion compared with $3.5 billion, as of Jun 30, 2020.
For nine months ended Sep 30, 2020, cash flow generated from operating activities was $750.2 million compared with $670.3 million of net cash utilized in operating activities for the same period in 2019.
Guidance
For fourth-quarter 2020, total revenues are expected between $709 million and $748 million driven by strength in the IMT and Mortgage segments.
IMT segment revenues are expected in the range of $400-$415 million, with Premier Agent revenues between $300 million and $310 million.
Homes revenues are expected between $260million and $280 million. Mortgages revenues are anticipated in the $49-$53 million range.
Moreover, adjusted EBITDA is expected between $107 million and $131 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 98.36% due to these changes.
VGM Scores
At this time, Zillow has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Zillow has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.