Citi Is Buying Realogy Holdings Into Next Week's Earnings Call

• The share price of Realogy Holdings Corp RLGY has declined 39.42 percent over the past one year, falling to a low of $28.11 on February 11.
• Citi’s Will Randow has maintained a Buy rating and price target of $51 on the company.
• Randow believes that despite the recent pullback, the stock deserves to trade at a premium to its building products peers due to its above average annual free cash flow yield and similar end-market drivers.

Analyst Will Randow believes that there are three catalysts for the stock, including robust 4Q15 results and guidance at the company’s earnings call on February 24, “share buybacks in 2016-17 near the company’s FCF yield levels” and “upside multiple mean reversion, supported by results, guidance, and buybacks.”

For 4Q15, Randow estimates revenue of $1.32 billion, above the consensus expectation of $1.28 billion, with adjusted EBIDTA of $0.18 billion and EPS of $0.21, for one of the seasonally slow quarters for Realogy Holdings.

With regard to the 1Q16 guidance, Randow expects the company to guide to transaction volume growth of 6-8 percent year on year, as compared to the consensus forecast close to the low-end of the range.

For 2016, the analyst estimated flattish adjusted EBITDA margin, year on year on 7 percent transaction volume growth, while expecting upside to the estimates at the current run-rate.