Jones Lang LaSalle Inc.’s (JLL - Analyst Report) first quarter 2013 adjusted earnings of 36 cents per share substantially surpassed the Zacks Consensus Estimate of 21 cents per share. However, it fell short of the year-ago quarter earnings of 50 cents per share. Quarterly results benefited from decent growth in revenues but higher expenses acted as a dampener.
Revenues for the reported quarter were $856 million, ahead of the Zacks Consensus Estimate of $841 million and up 5% year over year. However, adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) came in at $48 million, reflecting a year-over-year decrease of 13%.
On a GAAP basis, Jones Lang reported net income of $13 million or 29 cents per share in the reported quarter, marginally down from $14 million or 31 cents per share reported in the year-ago quarter.
Quarter in Detail
By segment, revenues from Jones Lang’s Real Estate Services segment increased 8% from the prior-year quarter to $796.3 million in the reported quarter. Revenues from the Americas region came in at $361.5 million, a year-over-year increase of 6%, primarily driven by growth in Capital Markets & Hotels revenues, reflecting market share gains.
Revenues in EMEA (Europe, Middle East, and Africa) increased 13% from the prior-year quarter to $244.9 million as Capital Markets & Hotels revenues moved up in the reported quarter. Geographically, growth was driven by Russia and the U.K.
In the Asia-Pacific region, revenues during the quarter increased 5% year over year to $189.9 million. The progress was driven by annuity growth in Property & Facility Management and transactional growth in Capital Markets & Hotels. Geographically, Hong Kong, China and Southeast Asia were the chief growth drivers.
Revenues from LaSalle Investment Management segment moved down 11% year over year to $59.7 million. This reflected a fall in incentive fees and advisory fees, partially offset by a rise in transactions fees. At quarter-end, assets under management were $47.7 billion, compared with $47.0 billion as of year-end 2012.
Total operating expenses were nearly $836 million for the quarter, representing a year-over-year increase of about 5%. Excluding restructuring and acquisition charges, total operating expenses were $833 million, up 7% year over year. The hike was mainly due to increased compensation costs for a larger employee base and improved performance.
Balance Sheet Position
At quarter-end, Jones Lang had a net debt of $870 million, flat year over year. Cash and cash equivalents at the end of first quarter 2013 were $133.5 million, down from $152.2 million at year-end 2012.
Encouragingly, Jones Lang’s board of directors declared a 10% hike in its semi annual dividend. The increased dividend now stands at 22 cents per share, up from 20 cents paid earlier. The hike reflects the company’s confidence in its cash generating capabilities.
Jones Lang, which operates as a single-source provider of real estate solutions with a broad range of real estate product and services, has an extensive knowledge of domestic and international real estate markets. In addition, Jones Lang has a strong balance sheet that enables it to continually invest in value drivers that act as key differentiators against tough competition.
Moving forward, Jones Lang’s management is confident of continuing with its winning streak in 2013 with a healthy pipeline, modestly improving global market dynamics, sustained market share gains and disciplined cost management efforts.
Moreover, during the first 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. Yet with a relative decline in real estate fundamentals, demand for Jones Lang’s services has decreased compared to the pre-recession levels, which is a cause of concern.
Jones Lang currently has a Zacks Rank #3 (Hold). A number of companies that are performing better and are worth a look in the same industry include E-House (China) Holdings Limited (EJ) and Reis Inc. (REIS - Snapshot Report), both carrying a Zacks Rank #2 (Buy).