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Jones Lang Q4 Earnings Beat on Higher Revs

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Aided by solid growth in revenues, Jones Lang LaSalle Inc.’s (JLL - Free Report) fourth-quarter 2013 adjusted earnings per share came in at $3.33, substantially ahead of the Zacks Consensus Estimate of $3.10 per share. Also, it came 28% above the year-ago quarter earnings of $2.60 per share.

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

Revenues for the reported quarter were $1.5 billion, well ahead of the Zacks Consensus Estimate of $1.3 billion and up 22% year over year. Fee revenue increased 17% from the prior-year quarter to $1.3 billion. Moreover, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) came in at $230 million, reflecting a year-over-year increase of 24%.

On a GAAP basis, Jones Lang reported net income of $147 million or $3.26 per share in the reported quarter, up from $107 million or $2.38 per share reported in the year-ago quarter.

For full-year 2013, the company earned $5.98 per share on revenues of $4.5 billion, well above the 2012 earnings of $4.63 per share on revenues of $3.9 billion.

Quarter in Detail

By segment, revenues from Jones Lang’s Real Estate Services increased 23% from the prior-year quarter to over $1.4 billion in the reported quarter. Moreover, revenues from LaSalle Investment Management segment moved up 6% year over year to $66.3 million.

At year end 2013, assets under management were $47.6 billion, up from $47.0 billion as of the prior-year end. The uptick was driven by $8.4 billion of acquisitions and takeovers, partially dwarfed by $7.4 billion of dispositions and withdrawals and $900 million of reductions owing to foreign currency movements.

Geographically, operating revenues from the Americas region came in at $604.4 million, a year-over-year increase of 15%. Results were supported by increased revenue from Capital Markets & Hotels and Property & Facility Management lines as well as leasing.

Operating revenues in EMEA (Europe, Middle East and Africa) increased 24% from the prior-year quarter to $407.6 million as a result of double-digit revenue growth in all service lines. Geographically, growth was driven by the UK, Germany, France, Russia and the Netherlands.

In the Asia-Pacific region, operating revenues increased 16% year over year to $271.2 million. It was mainly broad-based across the region’s Property & Facility Management platform. Geographically, results were driven primarily by Greater China.

Total operating expenses were around $1.3 billion for the quarter, representing a year-over-year increase of about 20%. Excluding restructuring and acquisition charges, consolidated fee-based operating expenses were $1.2 billion, up 16% year over year.
Adjusted operating income margin (on a fee revenue basis) came in at 14.8% for the quarter, up 70 basis points year over year.


Jones Lang lowered its net debt to $437 million from $538 million at the end of the prior year. Encouragingly, this represents the company’s second successive year of lowering its debt by over $100 million. Jones Lang exited the year with cash and cash equivalents of $152.7 million, up from $152.2 million at year-end 2012.

In October, Jones Lang renewed its long-term credit facility. In particular, the credit facility has been raised to $1.2 billion from $1.1 billion and the maturity has been pushed further to Oct 2018 from Jun 2016. Moreover, the pricing for the facility resulted in a 0.375% decline from the prior pricing.

Our Viewpoint

We are encouraged with the better-than-expected earnings at Jones Lang. Healthy performance of its Capital Markets & Hotels and Property & Facility Management platform are expected to support its results going forward. Though Brazil remains challenged, especially in its leasing markets, we believe that the improving trends in leasing in other markets would help offset this negative.

Moreover, we believe that its increased credit facility along with a solid balance sheet provide the company the wherewithal to carry on investing in growth drivers going forward. Last November, Jones Lang LaSalle disclosed that it was selected by Gemalto – a leading international digital security company – to act as adviser for its worldwide real estate operations. The company also acquired a Houston-based property management company – Means Knaus Partners (MKP) in the third quarter to enhance its office property management capacities.

Jones Lang currently has a Zacks Rank #3 (Hold). Some other stocks worth considering in the real estate operations industry include NorthStar Realty Finance Corp. , Kennedy-Wilson Holdings, Inc. and RE/MAX Holdings, Inc. (RMAX - Free Report) . All these stocks carry a Zacks Rank #2 (Buy).

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