It has been about a month since the last earnings report for CoStar Group (CSGP Quick QuoteCSGP - Free Report) . Shares have lost about 5.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is CoStar due for a breakout? 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.

CoStar Group Q1 Earnings Beat Estimates, Revenues Up Y/Y

CoStar Group reported non-GAAP earnings of 10 cents per share in first-quarter 2024, surpassing the Zacks Consensus Estimate by 66.67% but dropping 65.5% year over year.

Revenues of $656.4 million beat the Zacks Consensus Estimate by 1.10% and increased 12.3% year over year. The upside was driven by robust performance in key segments.

Top-Line Details

CoStar revenues (38.1% of revenues) of $250.3 million missed the consensus estimate by 0.30% and increased 11.2% year over year. Apartments.com revenues increased 21% year over year. In the first quarter, both Apartments.com and CoStar generated more than $1 billion in sales. Net new bookings in the first quarter amounted to $86 million.

Information Services revenues (5% of revenues) of $33 million beat the consensus mark by 1.23% but declined 20.7% year over year.

Multifamily revenues (38.8% of revenues) of $254.8 million beat the consensus estimate by 1.42% and increased 20.9% year over year.

LoopNet revenues (10.5% of revenues) of $69.1 million beat the consensus mark by 0.65% and were up 9.2% year over year.

First-quarter residential revenues (2.8% of revenues) were $18.6 million, beating the consensus mark by 12.73% and increased 40.9% year over year. In March, residential network traffic hit a record of 156 million unique visitors, a 102% increase year over year.

Other marketplace revenues (4.7% of revenues) of $30.6 million beat the consensus mark by 2.69% and were flat year over year.

As reported by Google Analytics, Homes.com achieved a milestone with 110 million unique visitors in the first quarter of 2024, surging 386% year over year.

Operating Details

In the reported quarter, selling and marketing expenses increased 61.8% year over year to $366.1 million. As a percentage of revenues, selling and marketing expenses were 55.8% compared with 38.7% reported in the year-ago quarter.

General and administrative expenses, as a percentage of revenues, declined 30 basis points (bps) on a year-over-year basis to 15%.

Software development expenses, as a percentage of revenues, expanded by 120 bps. Customer base amortization expenses contracted 10 bps on a year-over-year basis.

Adjusted EBITDA margin in the first quarter was 1.9% compared with 21% in the year-ago quarter.

Acquisition Details

In the first quarter of 2024, CoStar Group announced a definitive agreement to acquire Matterport, a global leader in immersive 3D digital twins and artificial intelligence (AI) for the real estate sector, for $5.50 per share in a cash and stock transaction valued at $1.6 billion.

The acquisition of Matterport represents a move towards integrating Matterport's 3D capture technology into CSGP’s real estate marketplaces, therefore enhancing CoStar's offerings and capitalizing on the growing demand for virtual real estate experiences.

Balance Sheet and Cash Flow Statement

CoStar reported cash and cash equivalents of $5 billion as of Mar 31, 2024, compared with $5.2 billion as of Dec 31, 2023.

The company had a long-term debt of $990.8 million as of Mar 31, 2024, compared with $990.5 million as of Dec 31, 2023.

It generated $139.6 million in cash from operations compared with $489.5 million in the previous quarter.

Guidance

CoStar expects second-quarter 2024 revenues between $674 million and $679 million, indicating year-over-year growth of approximately 12% at the midpoint.

The company anticipates adjusted EBITDA to be between $5 million and $10 million for the second quarter of 2024.

Earnings are expected to be between 9 cents and 10 cents for the second quarter of 2024.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -18.75% due to these changes.

VGM Scores

Currently, CoStar has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, CoStar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

CoStar is part of the Zacks Computers - IT Services industry. Over the past month, Infosys (INFY Quick QuoteINFY - Free Report) , a stock from the same industry, has gained 1.4%. The company reported its results for the quarter ended March 2024 more than a month ago.

Infosys reported revenues of $4.56 billion in the last reported quarter, representing a year-over-year change of +0.2%. EPS of $0.23 for the same period compares with $0.18 a year ago.

For the current quarter, Infosys is expected to post earnings of $0.18 per share, indicating a change of +5.9% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.2% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Infosys. Also, the stock has a VGM Score of D.