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Analyst Blog

On Nov 7, 2013, we upgraded our long-term recommendation on Jones Lang LaSalle Inc. (JLL - Analyst Report) to Neutral from Underperform following its strong results in third-quarter 2013 and improving market fundamentals.

Why the Upgrade?

After a disappointing performance in the prior quarter, Jones Lang’s third-quarter 2013 adjusted earnings per share came in at $1.49, substantially ahead of the Zacks Consensus Estimate of $1.35 per share. It also came 21% above the year-ago quarter earnings of $1.23 per share.

Quarterly results benefited from decent growth in fee revenues, driven by Capital Markets & Hotels and Property & Facility Management as well as strong leasing performance.

Jones Lang, which boasts of clients like HSBC Holdings plc. , acquired a Houston-based property management company - Means Knaus Partners (MKP) in the third quarter to enhance its office property management capacities. Moreover, the company acquired the Kansas City-area commercial real estate firm Capital Realty. The acquisitions augur well for the company’s long-term growth.

The company has also renewed and increased the capacity of its long-term credit facility of more favorable pricing. We believe that its increased credit facility along with a solid balance sheet provides the company the wherewithal to carry on investing in growth drivers going forward.

However, structural and political issues have prevented a strong upturn in the U.S. and led to inconsistent and slow paced development of certain Asian markets, such as China and India. Moreover, continuation of the slowdown in Brazil is a plausible concern for the stock. Also, Jones Lang faces stiff competition from international, regional, and local players in the market.

For Jones Lang, over the last 7 days, the Zacks Consensus Estimates for both 2013 and 2014 moved north. It climbed 0.8% to $6.04 per share for 2013 and 0.3% to $6.99 per share for 2014. Hence, the stock currently carries a Zacks Rank #2 (Buy).

Other Stocks to Consider

A number of companies that are performing better and are worth a look in the same industry include E-House (China) Holdings Ltd (EJ) with a Zacks Rank #1 (Strong Buy) and HFF, Inc. (HF - Snapshot Report) with a Zacks Rank #2 (Buy).
 

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