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Analyst Blog

On Mar 15, 2013, we reiterated our long-term recommendation on Jones Lang Lasalle Inc. (JLL - Analyst Report) at Neutral. This reflects the company’s extensive foothold in the domestic and international real estate markets and its continued investment in industry-leading research. However, a decrease in demand for Jones Lang’s services owing to a relative decline in real estate fundamentals is a major concern.

Why Neutral?

Jones Lang’s broad range of real estate product services with a worldwide portfolio of approximately 2.6 billion square feet makes it an industry leader in property and corporate facility management services. Also, its investment management business is one of the largest and most diverse in the real estate sector. The segment recorded an increase of 5% year over year to $285.4 million in revenues, and with $47 billion of assets under management at the end of the year.

In addition, Jones Lang has a strong balance sheet that provides it with an operating flexibility to protect and enhance market positions. The company’s outstanding debt decreased $105 million during 2012. On long-term revolving credit facility, it also decreased from the prior year.

Moreover, in the current quarter, global banking giant HSBC Holdings plc named Jones Lang ‘exclusive global facilities management provider’ for its 58 million square feet portfolio. The assignment represents the largest ever outsourcing of facilities management service to a single provider by a financial company.  This augurs well for its long-term growth.

Jones Lang came up with modest results in the fourth quarter of 2012, with adjusted earnings of $2.60 per share, lagging the Zacks Consensus Estimate by a penny. However, adjusted earnings were ahead of $2.56 per share reported in the year-ago quarter. Results for the quarter were benefited by a decent hike in revenues, but higher expenses acted as a dampener.

Following the release of the fourth quarter and full year 2012 results, the Zacks Consensus Estimate for full year 2013 moved down 0.8% to $6.24 per share. Also, the Zacks Consensus Estimate for full year 2014 inched down 0.7% to $7.11 per share. With the Zacks Consensus Estimates marginally moving down for both full year 2013 and 2014, Jones Lang now has a Zacks Rank #3 (Hold).

Other Stocks to Consider

REITs that are currently performing better than Jones Lang include Agree Realty Corp. (ADC - Snapshot Report) and Federal Realty Investment Trust (FRT - Analyst Report). Both the stocks carry a Zacks Rank #2 (Buy).

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