It has been about a month since the last earnings report for Jones Lang LaSalle (JLL - Free Report) . Shares have added about 14.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Jones Lang LaSalle due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Jones Lang LaSalle Q2 Earnings Miss on Coronavirus Crisis
JLL’s second-quarter 2020 adjusted earnings missed the Zacks Consensus Estimate of 77 cents. The bottom-line figure also compared unfavorably with the year-ago quarter adjusted earnings of $2.94 per share.
The quarterly results reflect the adverse impact of the coronavirus pandemic on the company’s top line, with transaction-based service lines being hit hard due to delays in leasing and capital market transactions. However, the property & facility management business, led by Corporate Solutions, provided support.
Revenues for the second quarter came in at $3.67 billion, marking a 14% decline year over year. However, the reported figure surpassed the Zacks Consensus Estimate of $3.59 billion. Fee revenues were down 24% year over year to $1.2 billion.
Moreover, adjusted EBITDA margin, calculated on a fee-revenue basis, was 8.3% compared with the prior-year quarter’s 13.9%. The contraction reflects decline in fee revenues, particularly within transaction-based service lines. This was, nonetheless, partly mitigated by the cost-reduction measures and government relief programs.
Behind the Headline Numbers
During the June-end quarter, JLL’s Real Estate Services (RES) revenues slipped 14% year over year to $3.57 billion. Notably, RES revenues declined across all three geographic segments and in all service lines except Property & Facility Management that was supported by Corporate Solutions.
In the Americas, revenues and fee revenues came in at $2.2 billion and $683.1 million, respectively, reflecting 10% and 21% year-over-year decline. Notably, the Americas transaction-based service lines were affected by the pandemic. Also, soft investment sales and debt placement activity hurt Capital Markets revenues, though it included incremental revenue contributions from HFF. However, new client wins, Corporate Solutions client expansions and pandemic-response facility management projects helped Property & Facility Management register significant fee revenue growth.
Revenues and fee revenues of the EMEA segment came in at $626.2 million and $268.0 million, down 23% and 29%, respectively, from the year-ago period, with pandemic-related mandatory country lockdowns affecting performance. Transaction-based revenues were substantially lower, particularly in the U.K. and France.
For the Asia-Pacific segment, revenues and fee revenues came in at $715.3 million and $198.8 million, respectively, marking a year-over-year fall of 16% and 24%. Transaction-based revenues bore the brunt and in particular, office leasing revenues were substantially lower, most notably in India, Australia and Greater China. Pause on deal activity, especially large transactions, affected Capital Markets revenues. Nevertheless, new client wins and expansion of existing mandates for Corporate Solutions boosted Property & Facility Management fee revenues.
Revenues in the LaSalle segment decreased 23% year over year to $99.9 million. Solid advisory fees indicated strong private equity capital raising over the trailing 12 months, though it was offset by recent valuation declines in assets under management. However, an overall decline in revenues chiefly reflects lower incentive fees.
At the end of second-quarter 2020, assets under management were $65 billion, down 6% from the last quarter end.
JLL exited the second quarter with cash and cash equivalents of $413.5 million, down from $451.9 million as of Dec 31, 2019. Moreover, as of Jun 30, 2020, the company’s net debt amounted to $1.1 billion, marking a decline of $450 million from March end and reflecting the operating cash flow drivers.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -27.44% due to these changes.
At this time, Jones Lang LaSalle has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Jones Lang LaSalle has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.