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SouFun Up on Impressive FY13 Earnings

Zacks Equity Research

Shares of SouFun Holdings Ltd. (SFUN) have risen since the company reported fourth quarter and full-year 2013 results and provided its 2014 revenue guidance (reflecting a 22.5–25% improvement over full-year revenues in 2013). Shares surged almost 17.3% to $92.47 on Mar 7, 2014, since the earnings announcement on Feb 10, 2014.

The Zacks Consensus Estimate for 2014 moved north by 8.9% to $4.16 over the last 30 days. Also, for 2015, the estimate rose 11.5% to $5.14 over the same timeframe.

SouFun’s solid performance across all business divisions resulted in operating earnings of $1.41 per share in the fourth quarter, almost 35% above the Zacks Consensus Estimate and an astounding 86% ahead of the year-ago earnings. On a full-year basis, earnings improved 73% and outpaced the Zacks Consensus Estimate by 7.8% while the top line improved 48% year over year.

This marked the 4th straight year of results surpassing the company guidance since SouFun went public. Additionally, it underlines the third consecutive quarter of positive earnings surprises.

SouFun boasts a strong competitive position that helps it to tap various growth opportunities. This is expected to help the company generate annual top line growth of over 20% going forward.

A large major portion of SouFun’s revenues in the last reported quarter was generated from marketing services. This division has a strong client base and revenues at this segment rose 21% in the fourth quarter. The e-commerce services segment (second largest revenue generator) has been posting strong performance since 2011. Revenues in this segment improved 67.2% year over year and with the rising demand for e-commerce in the real estate space, this division is expected to maintain the strong momentum.

The third segment – listing services (third highest revenue generator) – registered a whopping 91.5% year-over-year growth. The company’s focus on these services is expected to help it to capitalize on future market opportunities as well.

Expenses, despite recording an increase, remained below the magnitude of revenue growth, making way for a substantial 81% improvement in operating income.

SouFun boasts a strong market presence which positions it as one of the leading real estate portals, both in terms of user traffic and market share. The company’s monthly unique visitors have reflected a rise since the fourth quarter of 2012 and the company has succeeded in maintaining its leading position in this sector in monthly unique visitors against key competitors. We expect this barrier to new entrants to help the company achieve its long-term objectives and enhance shareholders value.

SouFun presently sports a Zacks Rank #1 (Strong Buy). Investors interested in the business services industry may also consider stocks like Rentrak Corp. (RENT), Crawford & Co. (CRD.B) and ExamWorks Group, Inc. (EXAM). While Rentrak shares the same Zacks Rank as SouFun, Crawford and ExamWorks carry a Zacks Rank #2 (Buy).

Read the Full Research Report on SFUN
Read the Full Research Report on RENT
Read the Full Research Report on EXAM
Read the Full Research Report on CRD.B

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