Real estate services firm Newmark (NASDAQ:NMRK) met Wall Street’s revenue expectations in Q3 CY2024, with sales up 11.3% year on year to $685.9 million. The company’s full-year revenue guidance of $2.65 billion at the midpoint came in slightly above analysts’ estimates. Its non-GAAP profit of $0.33 per share was 10.9% above analysts’ consensus estimates.
Is now the time to buy Newmark? Find out by accessing our full research report, it’s free.
Newmark (NMRK) Q3 CY2024 Highlights:
- Revenue: $685.9 million vs analyst estimates of $681.6 million (in line)
- Adjusted EPS: $0.33 vs analyst estimates of $0.30 (10.9% beat)
- EBITDA: $112.6 million vs analyst estimates of $119.3 million (5.6% miss)
- The company lifted its revenue guidance for the full year to $2.65 billion at the midpoint from $2.47 billion, a 7.3% increase
- Adjusted EPS guidance for the full year is $1.14 at the midpoint, roughly in line with what analysts were expecting
- EBITDA guidance for the full year is $420 million at the midpoint, below analyst estimates of $434 million
- Gross Margin (GAAP): 35.7%, in line with the same quarter last year
- Operating Margin: 6%, up from 4.4% in the same quarter last year
- EBITDA Margin: 16.4%, in line with the same quarter last year
- Market Capitalization: $2.49 billion
Company Overview
Founded in 1929, Newmark (NASDAQ:NMRK) provides commercial real estate services, including leasing advisory, global corporate services, investment sales and capital markets, property and facilities management, valuation and advisory, and consulting.
Real Estate Services
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.
Sales Growth
A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Newmark’s sales grew at a sluggish 3.3% compounded annual growth rate over the last five years. This shows it failed to expand in any major way, a rough starting point for our analysis.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Newmark’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 7.9% annually. 
Newmark also breaks out the revenue for its three most important segments: Management, Leasing, and Investment Sales, which are 41.2%, 31.3%, and 27.5% of revenue. Over the last two years, Newmark’s Management revenue (property management) averaged 6.6% year-on-year growth while its Leasing (sourcing tenants) and Investment Sales (financial advisory) revenues averaged declines of 3.6% and 8.7%.
This quarter, Newmark’s year-on-year revenue growth was 11.3%, and its $685.9 million of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 10.1% over the next 12 months, an improvement versus the last two years. While this projection shows the market thinks its newer products and services will fuel better performance, it is still below average for the sector.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.
Newmark has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 5.7%, subpar for a consumer discretionary business.
Key Takeaways from Newmark’s Q3 Results
It was good to see Newmark beat analysts’ EPS expectations this quarter. We were also glad it lifted its full-year revenue guidance. Zooming out, we think this was a decent quarter featuring some areas of strength but also some blemishes. The stock remained flat at $14.65 immediately following the results.
Is Newmark an attractive investment opportunity right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
