Jones Lang (JLL) Q3 Earnings Miss, Revenues Beat, Stock Up 7%
Shares of Jones Lang LaSalle Incorporated JLL — popularly known as JLL — gained 7.01% during the Nov 2 regular trading session on the NYSE, reflecting positive broader market sentiments in response to the Federal Reserve’s decision to keep interest rates unchanged in its latest meeting.
However, the real estate operations company reported third-quarter 2023 adjusted earnings per share (EPS) of $2.01, lagging the Zacks Consensus Estimate of $2.35. The reported figure also plunged 40.9% from the prior-year quarter.
Results reflect underperformance in the transaction-based businesses, specifically Investment Sales and Debt/Equity Advisory within Capital Markets and Leasing within Markets Advisory, owing to economic uncertainty, elevated interest rates and geopolitical instability in several regions. Nonetheless, the company benefited from the continued strength in its resilient lines of business.
Revenues of $5.11 billion, although falling 1.3% from the year-ago quarter’s $5.18 billion, surpassed the Zacks Consensus Estimate of $5.10 billion.
The quarterly adjusted EBITDA margin dipped 200 basis points to 11.5% (USD) from the prior-year period. Lower transaction-based revenues and the change in equity earnings/losses, net of carried interest, led to this fall, which was partially offset by the benefit received from recent cost reduction actions.
Per Christian Ulbrich, CEO of JLL, “JLL's third-quarter financial results reflected continued focus on diversifying our business. During the quarter, fee revenue expanded across our resilient business lines while the industry-wide slowdown in investment sales and leasing transactions continued. Our investments in technology and the improved efficiency of our operating model position us to expand margins even if a slower transaction environment persists.”
Segment-Wise Performance
During the third quarter, the Markets Advisory segment’s revenues and fee revenues came in at $992.4 million and $704.0 million, respectively, reflecting a fall of 10.7% and 17% (in USD) year over year. The decline was mainly due to the Leasing segment’s underperformance amid continued economic uncertainty, which has delayed commercial real estate decision-making, particularly for large-scale leasing actions. As a result, lower transaction volume and a decrease in average deal size across almost all asset types, specifically the office sector, hurt the segment’s performance.
Revenues and fee revenues for the Capital Markets segment were $435.8 million and $431.4 million, respectively, decreasing 26.8% and 25.5% (in USD) year over year. The fall was mainly due to muted transaction volume compared with 2022 due to economic and interest rate uncertainty. This chiefly affected JLL’s Investment Sales and Debt/Equity Advisory businesses across almost all asset sectors and regions compared with the prior-year quarter.
JLL’s Work Dynamics segment reported revenues and fee revenues of $3.51 billion and $497.7 million, respectively, up 6.8% and 9.9% (in USD) year over year. The uptick in revenues and fee growth was broad-based across service lines. Ongoing project execution, predominantly in the U.K., MENA, Italy and Southeast Asia, drove strong Project Management results while an increase in new, global client wins aided Workplace Management’s growth.
JLL Technologies segment reported revenues and fee revenues of $58.9 million and $55.6 million, respectively, rising 4.2% and 5.5% (in USD) from the prior-year quarter levels. The growth in solutions and service offerings, largely from existing enterprise clients, supported the uptick.
The revenues and fee revenues in the LaSalle segment fell 11.6% and 11.5% (in USD) year over year to $110.1 million and $102.7 million, respectively. The decline was mainly due to subdued transaction volumes, as evidenced by lower incentives and transaction fees. Although real estate valuation decreased over the trailing 12 months, adversely impacting assets under management (AUM), Advisory fee performance remained resilient.
As of Sep 30, 2023, LaSalle had $77.7 billion of real estate AUM, down from $$78.2 billion as of Jun 30, 2023. This resulted from decreases in net valuation and foreign currency and dispositions and withdrawals, partially offset by the rise in acquisitions.
Balance Sheet
JLL exited the third quarter with cash and cash equivalents of $389.5 million, down from $402.5 million as of Jun 30, 2023.
As of Sep 30, 2023, the net leverage ratio was 2.2, down from 2.3 as of Jun 30, 2023, but up from 1.1 as of Sep 30, 2022. The corporate liquidity was $2.1 billion as of the third quarter's end.
The company repurchased 123,160 shares during the reported quarter for $20.1 million. As of Sep 30, 2023, $1,115.5 million remained authorized for repurchase under the share repurchase program.
JLL currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Jones Lang LaSalle Incorporated Price, Consensus and EPS Surprise
Jones Lang LaSalle Incorporated price-consensus-eps-surprise-chart | Jones Lang LaSalle Incorporated Quote
Performance of Other Broader Real Estate Market Stocks
CBRE Group Inc.’s CBRE third-quarter 2023 core EPS of 72 cents surpassed the Zacks Consensus Estimate of 65 cents. The quarterly revenues of $7.87 billion also compared favorably with the Zacks Consensus Estimate of $7.63 billion. CBRE’s results reflected growth in its resilient lines of business, led by Global Workplace Solutions (“GWS”).
However, on a year-over-year basis, the core EPS declined by 35.7%, while revenues increased 4.5%. Despite growth in GWS and other resilient businesses, commercial real estate capital markets were under significant pressure in the third quarter, leading to a continued slowdown in property sales and debt financing activity.
Host Hotels & Resorts, Inc. HST reported adjusted funds from operations (AFFO) per share of 41 cents, outpacing the Zacks Consensus Estimate of 35 cents. Moreover, the figure increased 7.9% from the prior-year quarter.
Results reflected higher revenues driven by year-over-year occupancy growth and improvements in group business. HST also raised its 2023 outlook for AFFO per share.
American Tower Corporation AMT reported AFFO per share, attributable to AMT common stockholders, of $2.58, beating the Zacks Consensus Estimate of $2.35. The figure climbed 9.3% year over year.
Results reflected better-than-anticipated revenues, aided by revenue growth across its Property segment. American Tower recorded healthy year-over-year organic tenant billings growth of 6.3% and total tenant billings growth of 7.3%. It also raised its outlook for 2023.
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