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Here's Why Realogy Is Plunging Today

What happened

Real estate service company Realogy (NYSE: RLGY), which is best known for such brokerage brands as Century 21, Coldwell Banker, ERA, and Sotheby's International Realty, dropped sharply on Tuesday after posting its fourth-quarter earnings results.

As of 11:20 a.m. EST on Tuesday, shares were lower by about 12%.

Curly-haired boy holding keys while standing next to a sold sign in front of his parents
Curly-haired boy holding keys while standing next to a sold sign in front of his parents

Image source: Getty Images.

So what

Realogy missed analyst expectations on the top and bottom lines -- badly. Revenue came in at $1.35 billion, shy of the $1.41 billion forecast and a 6.2% drop from the same quarter a year ago.

The bottom line was even worse. Realogy earned just $0.04 per share, one-third of the $0.12 analysts were looking for.

Furthermore, Realogy's homesale transaction volume declined 5% year over year in the fourth quarter, which is sharper than the 4% industrywide drop.

Realogy's management didn't sound overly thrilled with the performance. CEO Ryan Schneider called 2018 "both an exciting and challenging time," while interim CEO Tim Gustavson expressed concerns about the company's 4.6 times leverage ratio in the midst of an uncertain housing market, saying that debt paydown will be a major focus during the first half of 2019 (as opposed to share repurchases).

Now what

There is definitely quite a bit of uncertainty in the U.S. housing market. Many experts are predicting an economic slowdown, which could adversely affect home sales, and inventory has been lacking in recent times in many U.S. markets. It's reasonable to expect some further volatility in the near term as this unpredictability remains.

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Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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