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Jones Lang LaSalle (JLL) Up 18.7% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Jones Lang LaSalle (JLL). Shares have added about 18.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Jones Lang LaSalle due for a pullback? 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 Q1 Earnings Miss, Revenues Beat Estimates

JLL reported first-quarter 2020 adjusted earnings of 49 cents per share, missing the Zacks Consensus Estimate of 76 cents. The bottom-line figure also compared unfavorably with the year-ago adjusted earnings of 89 cents per share.

Notably, non-cash charges associated with COVID-19 affected the otherwise healthy margin development.

The macroeconomic impact of the pandemic led to certain non-cash charges this quarter, including a $30.6-million increase to loan loss credit reserves in Americas and $40.3 million of equity losses from fair value declines in LaSalle.

However, revenues for the first quarter came in at $4.1 billion, outpacing the Zacks Consensus Estimate of $3.8 billion. The reported figure improved 7%, year over year. Also, fee revenues were up 14% year over year to $1.5 billion.

Though the company witnessed decent trend of quarterly growth in Americas leasing, and reported organic Real Estate Services fee revenue growth of 5% despite the coronavirus crisis. Moreover, continued progress on the HFF Inc. integration resulted in solid Capital Markets performance while double-digit increase in facilities management aided Corporate Solutions.

Concurrent with the first-quarter 2020 earnings, the company has announced suspension of its dividend payment to shareholders. Though in first-quarter 2020, the company repurchased nearly 188 thousand shares for $25 million under its $200-million plan approved in October 2019, in light of the coronavirus pandemic and associated economic uncertainties worldwide, JLL has suspended its share-repurchase activity.

Behind the Headline Numbers

During the March-end quarter, JLL’s Real Estate Services revenues climbed 7% year over year to $3.9 billion. Result reflected solid Capital Markets performance, largely due to the Jul 1, 2019, acquisition of HFF Inc.

In the Americas, revenues and fee revenues came in at $2.52 billion and $918.4 million, respectively, reflecting 12% and 29% year-over-year growth. Growth was strong and broad-based across all service lines. Results were backed by Capital Markets with $140.9 million of incremental revenue contributions from HFF. Leasing too performed well in the U.S. while Corporate Solutions reported double-digit fee revenue growth with net new wins and existing client expansions, as reflected in Property & Facility Management and Project &Development Services.

Revenues and fee revenues of the EMEA segment came in at $755.9 billion and $310.5 million, up 4% but down 2%, respectively, from the year-ago period. Results highlighted decent performance in Capital Markets and Project & Development Services. However, the company experienced decline in Property & Facility Management fee revenues which reflects the sale of certain property management businesses in continental Europe in late 2019.

For the Asia-Pacific segment, revenues and fee revenues came in at $712.1 million and $177.7 million, respectively, marking a year-over-year fall of 5% and 10%, largely due to Greater China and to a lesser extent Japan, mainly in transactions-based service lines. Corporate Solutions was principally flat year over year with growth in integrated facilities management and advisory services being mostly offset by the impact of temporary work stoppages on Project & Development Services mandates.

Revenues in the LaSalle segment increased 7% year over year to $104.9 million. Growth in advisory fee revenues mainly resulted from decent private equity capital raising during the trailing 12-month period.

At the end of first-quarter 2020, assets under management were $69.5 billion, up 2.8% from the $67.6 billion recorded at the end of the last quarter.

Liquidity

JLL exited the first quarter with cash and cash equivalents of $720.7 million, up from $451.9 million as of Dec 31, 2019.

The company’s net debt totaled $1.5 billion as of Mar 31, 2020, marking an increase of about $650 million from Dec 31, 2019, reflecting around $650 million of incentive compensation payments made in the first quarter.

How Have Estimates Been Moving Since Then?

Estimates review followed a downward path over the past two months. The consensus estimate has shifted -49.63% due to these changes.

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VGM Scores

At this time, Jones Lang LaSalle has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

Outlook

Jones Lang LaSalle has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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