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Jones Lang LaSalle (JLL) Stock Down on Q3 Earnings Miss

Shares of Jones Lang LaSalle Inc. JLL — popularly known as JLL — lost 12.5% during Nov 2 regular trading session on the NYSE after the real estate services company reported dismal results for third-quarter 2022 on poor transaction-based businesses.

JLL reported third-quarter 2022 adjusted earnings per share (EPS) of $3.40, lagging the Zacks Consensus Estimate of $4.52. The reported figure declined 25.4% from the prior-year quarter’s $4.56.

Revenues in the quarter totaled $5.17 billion, falling 5.9% from the year-ago quarter’s $4.88 billion. The Zacks Consensus Estimate for the same was pegged at $5.19 billion.

Results reflect decent performance in annuity-based businesses like Workplace Management under Work Dynamics and Property Management under Markets Advisory. However, transaction-based businesses, specifically the Capital Markets and Leasing under Markets Advisory, were hit by higher interest rates and rapid changes in the economic sentiment globally.  

The quarterly adjusted EBITDA margin, calculated on a fee-revenue basis, fell to 13.5% (USD) from 17.2% in 2021 due to lower Capital Markets revenues, higher compensation expenses, and incremental T&E and marketing expenses.

Segment-Wise Performance

During the third quarter, the Market Advisory segment’s revenues and fee revenues came in at $1.11 billion and $847.9 million, respectively, reflecting a rise of 3% and 1% (in USD) year over year. Growth in the Leasing line of business was mixed and improved only 1.1% (USD). Although average deal size increased, particularly in the office sector, deal volume fell in almost all asset classes.

Revenues and fee revenues for the Capital Markets segment were $595.2 million and $579.1 million, respectively, decreasing 12.5% and 9.4% (in USD) year over year. The fall was due to lower Investment Sales and Equity Advisory fees as higher interest rates and economic uncertainty hurt transaction volumes and extended the deal-cycle time.

JLL’s Work Dynamics segment reported revenues and fee revenues of $3.28 billion and $452.9 million, respectively, up 11.1% and 8.7% (in USD) year over year. The rise in revenues and fee growth was attributable to new client wins and the expansion of existing global mandates in Workplace Management services. The continued momentum in project demand from the return-to-office movement and lower pandemic-related restrictions drove the Project Management services’ growth.

JLL Technologies segment reported revenues and fee revenues of $56.5 million and $52.7 million, respectively, rising 45.6% and 53.2% (in USD) from the prior-year quarter levels. This top-line growth included $9.2 million of incremental fee revenues from acquisitions closed in late 2021. Backed by new customers and growth from existing customers in software and solutions offerings, organic fee revenues increased 28% year over year.

The revenues and fee revenues in the LaSalle segment fell 4.1% and 5.9% (in USD) year over year to $124.5 million and $166 million, respectively. The rise in advisory fees was driven by strong capital raising along with a rise in the fair value of assets under management over the trailing 12 months. However, greater economic uncertainty slowed down transaction activity and led to lower incentive fees associated with real estate dispositions on behalf of clients, offsetting the growth in advisory fees.

As of Sep 30, 2022, LaSalle had $81.7 billion of real estate assets under management (AUM), down from $82.1 million as of Jun 30, 2022. This resulted from the decrease in foreign currency and dispositions and withdrawals, partially offset by the rise in acquisitions and acquisitions.

Balance Sheet

JLL exited third-quarter 2022 with cash and cash equivalents of $489.4 million, down from $568.0 million as of Jun 30, 2022.

As of Sep 30, 2022, the net leverage ratio was 1.1, up from 1.0 as of Jun 30, 2022, and 0.4 as of Sep 30, 2021. The corporate liquidity was $2.1 billion as of the same date.

The company repurchased 909,200 shares for $153.5 million during the third quarter.

During the third quarter, JLL amped up the borrowing capacity of its credit facility from $2.75 billion to $3.35 billion.

JLL currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Jones Lang LaSalle Incorporated Price, Consensus and EPS Surprise

Jones Lang LaSalle Incorporated price-consensus-eps-surprise-chart | Jones Lang LaSalle Incorporated Quote

Performance of Other Real Estate Stocks

CBRE Group Inc.’s CBRE third-quarter 2022 core EPS of $1.13 lagged the Zacks Consensus Estimate of $1.24. The figure also declined by 18.7% from the year-ago tally.

CBRE’s quarterly results reflect lower-than-expected revenues amid the weakening of the macro environment, particularly the deterioration of the capital market environment. This caused both sales and loan originations to fall steeply.

Colliers International Group’s CIGI third-quarter 2022 adjusted EPS of 1.41 cents lagged the Zacks Consensus Estimate of $1.68. However, the figure increased 11% year over year.

CIGI’s quarterly revenues of $1.11 billion beat the Zacks Consensus Estimate by 2.3%. On a year-over-year basis, adjusted EPS and revenues climbed 11% and 2.3%, respectively.

eXp World Holdings EXPI reported third-quarter 2022 EPS of 3 cents, lagging the Zacks Consensus Estimate of 6 cents. Moreover, the figure compared unfavorably from the year-ago quarter’s of 15 cents.

EXPI generated revenues of $1.2 billion, missing the Zacks Consensus Estimate of $1.4 billion. However, revenues grew 12% year over year.

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