Zillow (ZG) Down 3.4% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Zillow Group (ZG). Shares have lost about 3.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Zillow due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Zillow Beats Q4 Earnings and Revenue Estimates
Zillow Group reported relatively healthy fourth-quarter 2023 results, wherein the bottom line and the top line beat the respective Zacks Consensus Estimate. Growing user base, drop in monthly mortgage payments on home purchases and strategic acquisitions proved tailwinds despite stiff competition and higher expenditures.
Net Income
GAAP net loss in the quarter was $73 million or a loss of 32 cents per share compared with a net loss of $72 million or a loss of 31 cents per share in the prior-year quarter. The marginal increase in losses despite higher revenues was due to higher operating expenses.
On a non-GAAP basis, the company’s net income declined marginally to $50 million or 20 cents per share from $52 million or 21 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate of 12 cents.
For 2023, Zillow witnessed a net loss of $158 million or a loss of 68 cents per share compared with a net loss of $101 million or a loss of 42 cents per share in 2022. On a non-GAAP basis, the company reported a net income of $319 million or $1.26 per share, down from $372 million or $1.43 per share in 2022.
Revenues
For 2023, total revenues declined 1% year over year to $1,945 million.
Quarterly revenues increased to $474 million from $435 million as both residential and rental segments witnessed a top-line expansion from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $451 million.
Residential revenues witnessed a 3% increase from $340 million in prior-year quarter to $349 million in fourth-quarter 2023.
Revenues in the rental segment witnessed a 37% rise to $93 million from $68 million in the previous-year quarter. The expansion in rental revenues was driven by growth in both multi and single-family listings.
The mortgages segment generated $22 million in revenues compared with $18 million in the year-earlier quarter. Integration of Zillow Home Loans with their Premier Agent partners and increasing volume of purchase mortgage orientation led to revenue growth.
Other Details
During the quarter, Zillow recorded a gross profit of $359 million compared with $346 million in the prior-year quarter. The increase is primarily due to healthy revenue growth in all the segments. The operating expenses during the quarter were $464 million, up from $429 million in the prior-year quarter. Adjusted EBITDA was $69 million compared with $73 million a year ago.
Cash Flow & Liquidity
In 2023, Zillow generated $354 million in cash from operating activities compared with $4,504 million in 2022. As of Dec 31, 2023, the company had $1,492 million in cash and cash equivalents compared with $1,466 million a year ago.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -142.86% due to these changes.
VGM Scores
Currently, Zillow has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Zillow has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Zillow Group, Inc. (ZG) : Free Stock Analysis Report
