Wrapping up Q2 earnings, we look at the numbers and key takeaways for the real estate services stocks, including Compass (NYSE:COMP) and its peers.
Technology has been a double-edged sword in real estate services. On the one hand, internet listings are effective at disseminating information far and wide, casting a wide net for buyers and sellers to increase the chances of transactions. On the other hand, digitization in the real estate market could potentially disintermediate key players like agents who use information asymmetries to their advantage.
The 14 real estate services stocks we track reported a mixed Q2. As a group, revenues beat analysts’ consensus estimates by 1.9% while next quarter’s revenue guidance was 13.1% below.
Inflation progressed towards the Fed's 2% goal recently, leading the Fed to reduce its policy rate by 50bps (half a percent or 0.5%) in September 2024. This is the first cut in four years. While CPI (inflation) readings have been supportive lately, employment measures have bordered on worrisome. The markets will be debating whether this rate cut's timing (and more potential ones in 2024 and 2025) is ideal for supporting the economy or a bit too late for a macro that has already cooled too much.
Thankfully, real estate services stocks have been resilient with share prices up 8.3% on average since the latest earnings results.
Compass (NYSE:COMP)
Fueled by its mission to replace the "paper-driven, antiquated workflow" of buying a house, Compass (NYSE:COMP) is a digital-first company operating a residential real estate brokerage in the United States.Compass reported revenues of $1.70 billion, up 13.8% year on year. This print exceeded analysts’ expectations by 3.3%. Overall, it was a strong quarter for the company with an impressive beat of analysts’ earnings estimates and a decent beat of analysts’ operating margin estimates.
"In light of a quarter where the real estate market saw historically low volume, I am particularly pleased that we achieved all-time high net income, all-time high Adjusted EBITDA, and generated positive free cash flow for the quarter, making the Company free cash flow positive in 4 of the last 5 quarters," said Robert Reffkin, Founder and Chief Executive Officer of Compass.
Interestingly, the stock is up 27.4% since reporting and currently trades at $5.62.
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Best Q2: The Real Brokerage (NASDAQ:REAX)
Founded in Toronto, Canada in 2014, The Real Brokerage (NASDAQ:REAX) is a technology-driven real estate brokerage firm combining a tech-centric model with an agent-centric philosophy.The Real Brokerage reported revenues of $340.8 million, up 83.9% year on year, outperforming analysts’ expectations by 28.9%. The business had an incredible quarter with an impressive beat of analysts’ earnings estimates.
The Real Brokerage delivered the biggest analyst estimates beat and fastest revenue growth among its peers. Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 7.2% since reporting. It currently trades at $5.06.
Weakest Q2: Offerpad (NYSE:OPAD)
Known for giving homeowners cash offers within 24 hours, Offerpad (NYSE:OPAD) operates a tech-enabled platform specializing in direct home buying and selling solutions.Offerpad reported revenues of $251.1 million, up 9.1% year on year, falling short of analysts’ expectations by 11.4%. It was a disappointing quarter as it posted revenue guidance for next quarter missing analysts’ expectations.
Offerpad delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 27.4% since the results and currently trades at $2.83.
eXp World (NASDAQ:EXPI)
Founded in 2009, eXp World (NASDAQ:EXPI) is a real estate company known for its virtual, cloud-based approach to real estate brokerage.eXp World reported revenues of $1.30 billion, up 5.2% year on year. This number met analysts’ expectations. More broadly, it was a satisfactory quarter as it also produced an impressive beat of analysts’ operating margin estimates but a miss of analysts’ earnings estimates.
The stock is down 6.2% since reporting and currently trades at $13.30.
RE/MAX (NYSE:RMAX)
Short for Real Estate Maximums, RE/MAX (NYSE:RMAX) operates a real estate franchise network spanning over 100 countries and territories.RE/MAX reported revenues of $78.45 million, down 4.8% year on year. This number met analysts’ expectations. Overall, it was a strong quarter as it also recorded an impressive beat of analysts’ operating margin estimates and a solid beat of analysts’ earnings estimates.
The stock is up 33.1% since reporting and currently trades at $11.53.
This content was originally published on Stock Story
