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CoStar (CSGP) Down 1% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for CoStar Group (CSGP - Free Report) . Shares have lost about 1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is CoStar due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

CoStar Group Q2 Earnings Beat Estimates, Revenues Up Y/Y

CoStar Group reported non-GAAP earnings of 15 cents per share in second-quarter 2024, surpassing the Zacks Consensus Estimate by 66.67% but plunging 51.6% year over year.

Revenues of $678 million beat the Zacks Consensus Estimate by 0.14% and increased 12% year over year. The upside was driven by robust performance in key segments.

Top-Line Details

CoStar revenues (37.3% of revenues) of $253 million beat the consensus estimate by 0.61% and increased 10.4% year over year. 

Apartments.com revenues increased 18% year over year. Net new bookings in the second quarter amounted to $67 million, with 79% from commercial real estate products and 21% from Homes.com memberships.

Information Services revenues (4.9% of revenues) of $33.4 million beat the consensus mark by 2.93% but declined 20.3% year over year. 

Multifamily revenues (39% of revenues) of $264.2 million beat the consensus estimate by 0.24% and increased 17.8% year over year.

LoopNet revenues (10.3% of revenues) of $70 million beat the consensus mark by 0.38% and were up 6.6% year over year.

Second-quarter residential revenues (3.9% of revenues) were $26.2 million, missing the consensus mark by 7.91% and increased 106.3% year over year. In June, residential network traffic hit a record of 148 million unique visitors, a 73% increase year over year.

Other marketplace revenues (4.6% of revenues) of $31.2 million missed the consensus mark by 5.21% and declined 3.4% year over year.

As reported by Google Analytics, Homes.com achieved a milestone with 99 million unique visitors in the second quarter of 2024, surging 197% year over year.

CoStar’s global websites reached a record 183 million average monthly unique visitors, an 81% increase year-over-year.

OnTheMarket, CoStar’s U.K. residential real estate portal, saw listings increase by 41% to 716,000 and average monthly visits rise 78% compared with the June 2023 tally. Average monthly unique visitors also increased by 118%.

In the second quarter, CSGP launched the Owner module, which provided enhanced insights into real estate portfolios, contributing to increased customer engagement.

Operating Details

In the reported quarter, selling and marketing expenses increased 43.4% year over year to $358.4 million. As a percentage of revenues, selling and marketing expenses were 52.9% compared with 41.3% reported in the year-ago quarter.

General and administrative expenses, as a percentage of revenues, expanded 130 basis points (bps) on a year-over-year basis to 16.2%.

Software development expenses, as a percentage of revenues, expanded by 130 bps. Customer base amortization expenses contracted 20 bps on a year-over-year basis.

Adjusted EBITDA margin in the second quarter was 6% compared with 20.9% in the year-ago quarter.

Balance Sheet and Cash Flow Statement

CoStar reported cash and cash equivalents of $4.9 billion as of Jun 30, 2024, compared with $5 billion as of Mar 31, 2024.

The company had a long-term debt of $991.2 million as of Jun 30, 2024, compared with $990.8 million as of Mar 31, 2024.

It generated $189.2 million in cash from operations compared with $139.6 million in the previous quarter.

Guidance

CoStar expects third-quarter 2024 revenues between $692 million and $697 million, indicating year-over-year growth of approximately 11% at the midpoint. 

The company anticipates adjusted EBITDA to be between $47 million and $52 million for the second quarter of 2024.

Earnings are expected to be between 15 cents and 16 cents for the third quarter of 2024.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -10.53% due to these changes.

VGM Scores

At this time, CoStar has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, CoStar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

CoStar is part of the Zacks Computers - IT Services industry. Over the past month, Infosys (INFY - Free Report) , a stock from the same industry, has gained 3.3%. The company reported its results for the quarter ended June 2024 more than a month ago.

Infosys reported revenues of $4.71 billion in the last reported quarter, representing a year-over-year change of +2.1%. EPS of $0.18 for the same period compares with $0.17 a year ago.

For the current quarter, Infosys is expected to post earnings of $0.19 per share, indicating a change of +5.6% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

Infosys has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.


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