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CoStar Group Boosts Outlook as Earnings Jump

Joe Tenebruso, The Motley Fool

CoStar Group (NASDAQ: CSGP) reported second-quarter results on July 23. The provider of real estate information services and online marketplaces delivered sharply higher profits, prompting it to raise its full-year financial forecast.

CoStar Group results: The raw numbers

Metric

Q2 2019

Q2 2018

Year-Over-Year Change

Revenue

$344 million

$297 million

16%

Net income

$63 million

$44 million

44%

Earnings per share

$1.73

$1.20

44%

Data source: CoStar Group Q2 2019 earnings release.

What happened with CoStar Group this quarter? 

CoStar Group delivered record bookings -- a key measure of sales productivity and future revenue growth -- fueled by the rapid expansion of its multifamily business.

"We generated our highest companywide net new bookings with $59 million in the second quarter, an increase of 32% year-over-year," Founder and CEO Andrew Florance said in a press release. "Apartments.com is showing exceptional momentum, with second-quarter sales bookings surging 122% year-over-year."

A person in a business suit holding an upwardly sloping digital chart.

CoStar Group's Apartments.com business is growing at a torrid clip. Image source: Getty Images.

This strong growth is helping CoStar Group widen its lead over its rivals. "Our Apartments.com network continued to expand its leadership position in traffic in the second quarter of 2019 with our highest level ever of unique visitors and visits according to ComScore," Florance said.

Moreover, CoStar Group's profitability continues to improve. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) -- which excludes stock-based compensation, acquisition-related charges, and restructuring costs -- jumped 29%, to $110 million. Non-GAAP (adjusted) net income, meanwhile, leapt 35%, to $82 million, or $2.23 per share.

Looking forward

These results prompted CoStar to boost its sales and profit forecast for 2019. The company is now guiding for full-year revenue of $1.382 billion to $1.39 billion, representing an increase of $11 million at the midpoint compared to its previous guidance. Additionally, management now expects adjusted EBITDA of $498 million to $505 million and adjusted earnings per share of $10.00 to $10.14, up from its prior forecast of $495 million to $505 million and $9.90 to $10.10. 

For the third quarter, CoStar's guidance includes:

  • Revenue of $350 million to $354 million, signifying year-over-year growth of 15% at the midpoint.
  • Adjusted EBITDA of $123 million to $127 million.
  • Adjusted earnings per share of $2.44 to $2.52. 

"Given our very strong results in the first half of 2019, we plan to raise the level of marketing investment in Apartments.com in the second half of 2019 accelerating the rate at which we are capturing market share," Florance said.

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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends CoStar Group. The Motley Fool has a disclosure policy.