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CoStar Group (CSGP) Q3 Earnings Meet Estimates, Revenues Up Y/Y

CoStar Group CSGP reported non-GAAP earnings of 30 cents per share in third-quarter 2023, in line with the Zacks Consensus Estimate.

Revenues of $625 million missed the Zacks Consensus Estimate by 0.16% but increased 12.2% year over year.

Top-Line Details

CoStar revenues (37.4% of revenues) of $233.4 million missed the consensus estimate by 0.18%, but increased 9.7% year over year. Apartments.com revenues increased 24% year over year. Net new bookings in the third quarter amounted to $65 million.

Information Services revenues (7.1% of revenues) of $44.6 million beat the consensus mark by 1% and increased 8.8% year over year.

Multifamily revenues (37.7% of revenues) of $235.3 million lagged the consensus estimate by 0.78% but increased 24.2% year over year.

CoStar Group, Inc. Price, Consensus and EPS Surprise

 

CoStar Group, Inc. Price, Consensus and EPS Surprise
CoStar Group, Inc. Price, Consensus and EPS Surprise

CoStar Group, Inc. price-consensus-eps-surprise-chart | CoStar Group, Inc. Quote

 

LoopNet revenues (10.8% of revenues) of $67.5 million beat the consensus mark by 2.05% and were up 14.6% year over year.

Third-quarter residential revenues (1.6% of revenues) were $10.3 million, missing the consensus mark by 8.91% and declining 46.8% year over year.

Other marketplace revenues (5.4% of revenues) of $33.6 million missed the consensus mark by 1.81% and decreased 5.3% year over year.

As reported by Google Analytics, Homes.com achieved a milestone with 100 million unique visitors in September.

Operating Details

In the reported quarter, selling and marketing expenses increased 44% year over year to $266.9 million. As a percentage of revenues, selling and marketing expenses were 42.7% compared with 33.3% reported in the year-ago quarter.

General and administrative expenses, as a percentage of revenues, dropped 130 basis points (bps) on a year-over-year basis to 15.1%.

Software development expenses, as a percentage of revenues, expanded by 60 bps. Customer base amortization expenses contracted 370 bps on a year-over-year basis.

Adjusted EBITDA margin in the third quarter was 17.9% compared with 27.4% in the year-ago quarter.

Balance Sheet and Cash Flow Statement

CoStar reported cash and cash equivalents of $5.2 billion as of Sept 30, 2023, compared with $5.2 billion as of Jun 30, 2023.

The company had a long-term debt of $990.1 million as of Sept 30, 2023, compared with $989.5 million as of Jun 30, 2023.

It generated $522.9 million in cash from operations compared with $298.4 million in the previous quarter.

Key Post Quarter Development

CoStar announced its plan to acquire OnTheMarket, a top UK residential property portal, leveraging its two-decade UK success and significant software investments in Homes.com to gain a technology scale advantage. The transaction is expected to close in fourth-quarter 2023.

Guidance

CoStar expects 2023 revenues between $2.445 billion and $2.450 billion, indicating a year-over-year growth of approximately 12% at the midpoint. The Zacks Consensus Estimate for revenues is pegged at $2.46 billion, indicating 12.74% year-over-year growth.

Commercial information and marketplace business is expected to deliver 14% revenue growth for 2023.

The company expects 2023 adjusted EBITDA in the range of $485-$490 million.

Fourth-quarter 2023 revenues are expected to be between $630 million and $635 million, indicating growth of approximately 10% at the mid-point. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $644.4 million.

Commercial information and marketplace business is expected to deliver 12% year-over-year revenue growth in the fourth quarter of 2023.

For the fourth quarter of 2023, CoStar expects adjusted EBITDA in the $123-$128 million range.

Earnings are expected between $1.21 and $1.22 per share for 2023. The consensus mark is pegged at $1.25 per share, unchanged in the past 30 days.

Moreover, earnings are projected to be between 31 and 32 cents per share for the fourth quarter. The Zacks Consensus Estimate for the quarter’s earnings is pegged at 35 cents, unchanged in the past 30 days.

Zacks Rank & Stocks to Consider

CoStar currently carries a Zacks Rank #2 (Buy).

CSGP’s shares have declined 4% compared with the Zacks Computer and Technology sector’s rise of 34.5% year to date.

Here are some better-ranked stocks worth considering in the broader sector.

GoDaddy GDDY, Blackblaze BLZE and Pinterest PINS are some better-ranked stocks that investors can consider in the broader sector.

All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

GoDaddy shares have returned 0.0% year to date. GoDaddy is scheduled to release third-quarter 2023 results on Nov 2.

BLZE shares have declined 16.6% year to date. BLZE is set to report its third-quarter 2023 results on Oct 26.

Pinterest shares have returned 10.3% year to date. PINS is set to report its third-quarter 2023 results on Oct 30.


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