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Jones Lang LaSalle (JLL) Down 8.1% Since Last Earnings Report: Can It Rebound?

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  • JLL

A month has gone by since the last earnings report for Jones Lang LaSalle (JLL). Shares have lost about 8.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Jones Lang LaSalle 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.

Jones Lang LaSalle Q3 Earnings & Revenues Top Estimates

JLL reported third-quarter 2021 adjusted earnings of $4.56 per share, beating the Zacks Consensus Estimate of $3.50. The reported figure is also significantly ahead of the prior-year quarter figure of $2.99.

Revenues for the quarter came in at $4.9 billion, surpassing the Zacks Consensus Estimate of $4.6 billion and 22.9% higher than the year-ago quarter tally.

Results reflect continuation of growth momentum in all segments and service lines, led by the Americas. The quarter saw a rebound in transaction-based revenues, highlighted by Capital Markets and Leasing.

According to Christian Ulbrich, JLL CEO, “The robust growth in revenue and profits was fueled by the ongoing recovery across the commercial real estate industry and the high demand for services and products from our clients.”

Apart from this, the quarterly adjusted EBITDA margin, calculated on a fee-revenue basis, was 17% (17.1% in local currency) compared with the prior year’s 17.2%. The 20-basis point net reduction in the margin reflects the expected reduction of certain non-permanent cost savings from 2020 and incremental investments in people and technology. These were, nonetheless, significantly offset by increase in revenues, mainly from the higher margin transaction-based service lines.

Behind the Headline Numbers

During the September-end quarter, JLL’s RES revenues climbed 23% (22% in local currency) year over year to $4.8 billion, highlighting broad-based growth across all service lines, primarily aided by Leasing and Capital Markets, as well as improvements across all geographic segments.

In the Americas, revenues and fee revenues came in at $3.08 billion and $1.3 billion, respectively, reflecting a 30% and 68% year-over-year jump. This displays continued growth in transaction-based service lines, with fee revenues markedly surpassing the third-quarter 2019 number. Growth in Leasing was fueled by both higher transaction volumes and an increase in deal size in the United States, while Capital Markets increase reflected higher deal activities across investment sales, debt advisory and equity advisory, as well as rise in servicing revenues from the multifamily business.

Revenues and fee revenues in the EMEA division came in at $830 million and $385.2 million, up 12% and 19%, respectively, from the year-ago period. This was driven by the transaction-based revenues, reflecting the continued recovery in several geographies. Growth in Capital Markets reflected higher deal volumes, mainly in the industrial, residential and office sectors, while increase in Leasing revenues was driven by transaction volume growth, primarily in office and industrial.In the Asia-Pacific region, revenues and fee revenues came in at $846.2 million and $262.1 million, respectively, marking a year-over-year increase of 14% and 23%. This was driven by the rebound in transaction-based revenues. Also, business growth in Valuation Advisory, particularly in Australia, resulted in the fee revenue increase in Advisory, Consulting and Other.

Revenues and fee revenues in the LaSalle segment increased 18% and 17% year over year to $129.8 million and $123.4, respectively. This was driven by higher incentive and advisory fees, partially offset by lower transaction fees.

At the end of third-quarter 2021, assets under management were $74.7 billion, up 2% from the last quarter end, reflecting net valuation increases, acquisitions and foreign-currency increases, partially offset by dispositions and withdrawals.

Liquidity

JLL exited third-quarter 2021 with cash and cash equivalents of $535.9 million, down from $574.3 million as of Dec 31, 2020. Additionally, as of Sep 30, 2021, the company’s net debt amounted to $487.3 million, marking a decrease of $161.3 million from the prior-quarter end and a decline of $264.6 million from the year-ago quarter end.

In third-quarter 2021, the company repurchased 658,900 shares for $149.9 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 5.53% due to these changes.

VGM Scores

At this time, Jones Lang LaSalle has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Jones Lang LaSalle has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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