Why Is Jones Lang LaSalle (JLL) Down 1.8% Since Last Earnings Report?

A month has gone by since the last earnings report for Jones Lang LaSalle (JLL). Shares have lost about 1.8% in that time frame, outperforming 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 drivers.

Jones Lang LaSalle Q2 FFO & Revenues Surpass Estimates

Jones Lang LaSalle reported second-quarter 2022 adjusted EPS of $4.48, beating the Zacks Consensus Estimate of $4.10. The reported figure increased 6.7% from the prior-year quarter’s $4.20.

Revenues in the quarter totaled $5.3 billion, surpassing the Zacks Consensus Estimate of $4.9 billion. It was 17.4% higher than the year-ago quarter’s tally.

JLL recorded revenue and fee revenue year-over-year growth of 21% and 23%, respectively, during the second quarter. Results reflect robust performance in the Capital Markets and Markets Advisory businesses. Moreover, annuity-based businesses under the Work Dynamics segment continued to furnish solid fee revenue growth.

However, the quarterly adjusted EBITDA margin, calculated on a fee-revenue basis, fell to 16.8% (USD) from 18.5% in 2021 due to a rise in compensation expenses, including higher commissions and increased headcount, T&E and marketing expenses, which more than offset the fee revenue growth.

Segment-Wise Performance

During the second quarter, the Market Advisory segment’s revenues and fee revenues came in at $1.1 billion and $855.8 million, respectively, reflecting an 18% and 20% (in USD) year-over-year jump. Revenues and fee revenue growth were driven by improvement in the Leasing line of business, which improved 24% (USD) year over year.

Revenues and fee revenues for the Capital Markets segment were $684.5 million and $660.7 million, respectively, both marking a 24% (in USD) year-over-year rise. The growth in fee revenues was broad-based, backed by higher debt advisory and investment sales.

JLL’s Work Dynamics segment reported revenues and fee revenues of $3.3 billion and $467 million, respectively, up 17% and 14% (in USD) year over year. The rise in revenues and fee growth was attributable to the commencement of Workplace Management services for new client acquisitions and expansion of existing global mandates, mainly in the United States and higher project demand under the Project Management line of business.

JLL Technologies segment reported revenues and fee revenues of $50.7 million and $48 million, respectively, rising 28% and 46% (in USD) from the prior-year quarter levels. This top-line growth included $8.3 million of incremental fee revenues from acquisitions closed during the second half of 2021. Backed by new customers and growth from existing customers in software and solutions offerings, organic fee revenues increased 22% year over year.

However, the revenues and fee revenues in the LaSalle segment fell 1.1% each (in USD) year over year to $114.5 million and $107.3 million, respectively. The rise in advisory fee, driven by strong capital raising along with a rise in fair value of assets under management over the trailing twelve months, was offset by the non-recurrence of the prior-year incentive fees associated with real estate dispositions on behalf of clients, mainly in the Asia Pacific, in the second quarter.

As of Jun 30, 2022, LaSalle had $82.1 billion of real estate assets under management, up 6% (USD) sequentially. The rise was fueled by an increase in acquisitions and net valuation, partially offset by dispositions, withdrawals and foreign currency decreases.

Balance Sheet

JLL exited second-quarter 2022 with cash and cash equivalents of $568.0 million, down from $575.8 million as of Mar 31, 2022.

As of Jun 30, 2022, the net leverage ratio was 1.0, up from 0.8 as of Mar 31, 2022, and 0.6 as of Jun 30, 2021. The corporate liquidity was $1.9 billion as of the same date.

During the second quarter, the company repurchased nearly 1.4 million shares for $297.7 million. Additionally, approximately $1.3 billion remained authorized for repurchase under the share repurchase program as of Jun 30, 2022.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

At this time, Jones Lang LaSalle has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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 #3 (Hold). We expect an in-line return from the stock in the next few months.

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