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Real estate services firm Cushman & Wakefield (NYSE:CWK) missed analysts' expectations in Q2 CY2024, with revenue down 4.9% year on year to $2.29 billion. It made a non-GAAP profit of $0.20 per share, down from its profit of $0.22 per share in the same quarter last year.
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Cushman & Wakefield (CWK) Q2 CY2024 Highlights:
- Revenue: $2.29 billion vs analyst estimates of $2.36 billion (2.9% miss)
- Adjusted EBITDA: $138.9 million vs analyst estimates of $132.1 billion (5.1% beat)
- EPS (non-GAAP): $0.20 vs analyst estimates of $0.18 (10.8% beat)
- Gross Margin (GAAP): 18.1%, up from 17.8% in the same quarter last year
- Free Cash Flow of $13.8 million is up from -$139.4 million in the previous quarter
- Market Capitalization: $3.10 billion
With expertise in the commercial real estate sector, Cushman & Wakefield (NYSE:CWK) is a global Chicago-based real estate firm offering a comprehensive range of services to clients.
Real Estate ServicesTechnology 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.
Sales GrowthA company's long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Regrettably, Cushman & Wakefield's sales grew at a weak 1.8% compounded annual growth rate over the last five years. This shows it failed to expand in any major way and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or emerging trend. Cushman & Wakefield's history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 4.3% annually.
We can better understand the company's revenue dynamics by analyzing its three most important segments: Management, Leasing, and Capital Markets, which are 37.8%, 19.7%, and 7.1% of revenue. Over the last two years, Cushman & Wakefield's Management revenue (property management) averaged 2.5% year-on-year growth while its Leasing (sourcing tenants) and Capital Markets (financial advisory) revenues averaged declines of 5.5% and 31.5%.
This quarter, Cushman & Wakefield missed Wall Street's estimates and reported a rather uninspiring 4.9% year-on-year revenue decline, generating $2.29 billion of revenue. Looking ahead, Wall Street expects sales to grow 11.4% over the next 12 months, an acceleration from this quarter.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Cushman & Wakefield has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1.4%, lousy for a consumer discretionary business.
Cushman & Wakefield broke even from a free cash flow perspective in Q2. This quarter's result was good as its margin was 1.7 percentage points higher than in the same quarter last year, but we wouldn't put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends trump fluctuations.
Key Takeaways from Cushman & Wakefield's Q2 Results It was good to see Cushman & Wakefield beat analysts' adjusted EBITDA and EPS expectations this quarter. On the other hand, its revenue unfortunately missed and its Leasing revenue fell short of Wall Street's estimates. Overall, this was a mixed quarter for Cushman & Wakefield. The stock traded down 2.3% to $13.01 immediately after reporting.
