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JLL Q2 Earnings Beat Estimates on Solid Fee Revenue Growth

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Helped by robust growth in fee revenue, Jones Lang LaSalle Inc. (JLL - Free Report) , which shortened its name to “JLL,” reported encouraging second-quarter 2014 adjusted earnings of $1.68 per share. Results comfortably exceeded the Zacks Consensus Estimate of $1.39 by 21% and came well above the year-ago quarter figure of $1.15.

Revenues for the reported quarter were around $1.3 billion, considerably ahead of the Zacks Consensus Estimate of $1.0 billion and up 29% year over year. Consolidated fee revenue increased 18% from the prior-year quarter to $1.1 billion, driven by growth in leasing and Property & Facility Management revenues.

As a result, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) came in at $132 million, reflecting a year-over-year increase of 29%.

On a GAAP basis, Jones Lang reported net income of $72 million or $1.58 per share, up from $46 million or $1.03 per share earned in the year-ago quarter.

Quarter in Detail

The 18% year-over-year rise in fee revenues was prompted by broad-based growth with Leasing up 23%, and Property & Facility Management increasing 22%. Geographically, fee revenues from the Americas came in at $493.6 million, denoting a year-over-year increase of 22%. Fee revenues in EMEA (Europe, the Middle East and Africa) increased 24% from the prior-year quarter to $309.0 million, while in the Asia-Pacific region it rose 8% year over year to $214.4 million.

Moreover, revenues from LaSalle Investment Management segment moved up 13% year over year to $81.5 million. At the end of second-quarter 2014, assets under management were $50.0 billion, up from $48.0 billion in the prior-quarter end. The rise was driven by a contribution of $1.7 billion from acquisitions and takeovers, $1.2 billion of net value increase and $0.2 billion of net uptick due to foreign currency movements, partially dwarfed by $1.1 billion of dispositions and withdrawals.

Adjusted operating income margin (calculated on a fee-revenue basis) increased to 9.0% from 8.0% a year ago. Also, adjusted EBITDA margin climbed 100 basis points to 12.2% in the quarter under review.


JLL exited the second-quarter with cash and cash equivalents of $150.7 million, marginally down from $152.7 million at year-end 2013. Aided by its solid cash generation capabilities, the company reduced its net debt by $162 million from the year-ago quarter to $672 million.

Ushering in good news for the company, its investment-grade rating outlook was improved to positive from stable by Standard & Poor’s during the quarter.

Our Viewpoint

Better-than-expected results at JLL keeps us encouraged. We believe that strength in the company’s Leasing and Property & Facility Management lines and investments in recruitment, IT and data would be the primary growth drivers going forward.

Recently, JLL announced the acquisition of CLEO Construction Management, as part of its effort to enhance healthcare-oriented real estate services in the West. Moreover, the company disclosed buyout of 49% stake in a Kuala Lumpur-based leading transaction and advisory business – YY Property Solutions Sdn Bhd. We believe that such strategic acquisitions and opportunistic hires would make JLL adequately capable of capitalizing on an improving market environment.
JLL currently carries a Zacks Rank #3 (Hold). Investors interested in the real estate industry may also consider stocks like FirstService Corporation , CBRE Group, Inc. and AV Homes, Inc. (AVHI - Free Report) . While FirstService sports a Zacks Rank #1 (Strong Buy), CBRE and AV Homes hold a Zacks Rank #2 (Buy).

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