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Bear of the Day: Realogy (RLGY)

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Realogy is still cashing in on the pandemic real estate craze. However, analysts have been cutting full year estimates on this Zacks Rank #5 (Strong Sell) over the last 2 months.

Were they simply too bullish?

Realogy offers residential real estate services across the United States including brokerage, relocation and title and settlement businesses. It also has a mortgage joint venture.

Realogy's brands include many well-known in the real estate industry such as Better Homes and Gardens Real Estate, Century 21, Coldwell Banker, Coldwell Banker Commercial, Corcoran, ERA and Sotheby's International Realty.

A Miss in the Third Quarter

On Oct 28, Realogy reported its third quarter results and missed on the Zacks Consensus Estimate by $0.09. Earnings were $0.99 versus the consensus of $1.08.

Revenue rose 15% to $2.2 billion.

Combined closed transaction volume rose 12% year-over-year, which was higher than the 9% year-over-year market volume growth reported by the National Association of Realtors.

Owned brokerage agent count rose 5% compared to last year, which was the 5th consecutive quarter of growth. Realogy continue to maintain strong retention levels.

Analysts Cut 2021 and 2022 Earnings Estimates

Despite the gain in revenue in the third quarter, the analysts were bearish on full year earnings over the last 60 days.

2 estimates were cut for 2021 in the last 2 months. That has pushed the Zacks Consensus Estimate down to $2.98 from $3.44 during that time.

That's still earnings growth of 48.3% as Realogy made just $2.01 in 2020.

But analysts were also cutting for 2022, which has pushed the 2022 Zacks Consensus Estimate down to $2.59 from $3.04 in the last 60 days.

That's a decline of 13.3%.

Shares Fall From Recent Highs

Shares of Realogy are up 20.8% year-to-date, but have fallen 7.4% over the past 3 months.

Zacks Investment ResearchImage Source: Zacks Investment Research

They are dirt cheap, with a forward P/E of just 5.3.

Realogy has had $458 million in free cash flow through Sep 30, 2021 and repaid $435 million of debt in the third quarter.

Investors interested in real estate companies should keep Realogy on their wish list for when the earnings estimates start turning around.

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