Jones Lang Q1 Earnings Miss, Shares Fall - Analyst Blog

Jones Lang LaSalle Inc.'s JLL first-quarter 2014 adjusted earnings per share came in at 39 cents, missing the Zacks Consensus Estimate by 3 cents. Results reflect a slowdown in capital markets revenues and shares fell 2.59% to $115.89 during yesterday's regular trading session on the NYSE.

However, earnings came 3 cents above the year-ago quarter figure, driven by growth in Leasing, Property & Facility Management as well as Project and Development Services lines.

Revenues for the reported quarter were $1.0 billion, well ahead of the Zacks Consensus Estimate of $880 million and up 21% year over year. Fee revenue increased 13% from the prior-year quarter to $878 million. Moreover, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) came in at $52 million, reflecting a year-over-year increase of 8%.

On a GAAP basis, Jones Lang reported net income of $16 million or 35 cents per share in the reported quarter, up from $13 million or 29 cents per share earned in the year-ago quarter.

Quarter in Detail

Fee revenues from Jones Lang's Real Estate Services increased 14% from the prior-year quarter to $814.0 million in the reported quarter. The company experienced broad-based revenue growth with Leasing up 18%, and Property & Facility Management climbing 20%.

Geographically, fee revenues from the Americas region came in at $406.5 million, a year-over-year increase of 20%. Fee revenues in EMEA (Europe, Middle East and Africa) increased 6% from the prior-year quarter to $234.0 million while in the Asia-Pacific region, it increased 11% year over year to $173.6 million.

Moreover, revenues from LaSalle Investment Management segment moved up 6% year over year to $63.8 million. At the end of first-quarter 2014, assets under management were $48.0 billion, up from $47.6 billion as of the prior-year end. The uptick was driven by $2.1 billion of acquisitions and takeovers, $0.9 billion of net value increase and $0.1 billion of net uptick due to foreign currency movements, partially dwarfed by $2.7 billion of dispositions and withdrawals.

Total operating expenses were around $1.05 billion for the quarter, representing a year-over-year increase of about 26%. Excluding restructuring and acquisition charges, consolidated fee-based operating expenses were $857 million, up 14% year over year.

Liquidity

Jones Lang exited the first-quarter 2014 with cash and cash equivalents of $140.1 million, down from $152.7 million at year-end 2013. Jones Lang lowered its net debt by $139 million to $731 million at the end of first-quarter 2014. However, this reflects an uptick from $437 million at the prior-year end and reflects incentive compensation payments in the first quarter and in line with the seasonal borrowing patterns.

Dividend Raise

Jones Lang announced a 5% hike in its semi-annual dividend to 23 cents per share from 22 cents paid earlier, reflecting confidence in the company's cash generation potentials. This increased dividend will be paid to the shareholders on Jun 13, 2014, to shareholders of record as of the close of business on May 15, 2014.

Our Viewpoint

While an earnings miss at Jones Lang is not encouraging, we believe that the strength in its Leasing and Property & Facility Management lines and investments in recruitment, IT and data would help this Zacks Rank #2 (Buy) stock to ride on the growth trajectory in the quarters ahead. Also the dividend hike is encouraging.

Investors interested in the real estate operations industry may also consider stocks like E-House (China) Holdings Limited EJ, HFF, Inc. HF and Reis, Inc. REIS. All these stocks carry a Zacks Rank #1 (Strong Buy).