CoStar (CSGP) Up 14.7% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for CoStar Group (CSGP). Shares have added about 14.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is CoStar due for a pullback? 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 catalysts.

CoStar Group Q4 Earnings Beat Estimates, Revenues Up Y/Y

CoStar Group reported non-GAAP earnings of 33 cents per share in fourth-quarter 2023, which surpassed the Zacks Consensus Estimate by 3.13% but dropped 13.2% year over year.

Revenues of $640 million beat the Zacks Consensus Estimate by 1.07% and increased 11.7% year over year.

Top-Line Details

CoStar revenues (37.1% of revenues) of $238 million beat the consensus estimate by 0.72% and increased 8.5% year over year. Apartments.com revenues increased 23% year over year. Net new bookings in the fourth quarter amounted to $34 million.

Information Services revenues (6.7% of revenues) of $42.7 million missed the consensus mark by 2.18% but increased 4.9% year over year.

Multifamily revenues (38.1% of revenues) of $244 million lagged the consensus estimate by 0.70% but increased 23.1% year over year.

LoopNet revenues (10.7% of revenues) of $69 million beat the consensus mark by 1.09% and were up 11.7% year over year.

Fourth-quarter residential revenues (1.6% of revenues) were $10 million, beating the consensus mark by 48.15% but declining 38.3% year over year.

Other marketplace revenues (5.8% of revenues) of $37.4 million beat the consensus mark by 11.1% but dropped 1.8% year over year.

During the fourth quarter, CoStar acquired OnTheMarket in the U.K., aiming to enhance its appeal to homebuyers and sellers. Since the acquisition, the company observed substantial growth in traffic and leads.

As reported by Google Analytics, Homes.com achieved a milestone with 43 million unique visitors in 2023.

Operating Details

In the reported quarter, selling and marketing expenses increased 42.2% year over year to $246.7 million. As a percentage of revenues, selling and marketing expenses were 38.5% compared with 30.3% reported in the year-ago quarter.

General and administrative expenses, as a percentage of revenues, increased 70 basis points (bps) on a year-over-year basis to 16.7%.

Software development expenses, as a percentage of revenues, expanded by 70 bps. Customer base amortization expenses contracted 50 bps on a year-over-year basis.

Adjusted EBITDA margin in the fourth quarter was 20.3% compared with 31.8% in the year-ago quarter.

Balance Sheet and Cash Flow Statement

CoStar reported cash and cash equivalents of $5.2 billion as of Dec 31, 2023, compared with $5.2 billion as of Sep 30, 2023.

The company had a long-term debt of $990.5 million as of Dec 31, 2023, compared with $990.1 million as of Sep 30, 2023.

It generated $489.5 million in cash from operations compared with $340.9 million in the previous quarter.

Guidance

CoStar expects first-quarter 2024 revenues between $645 million and $650 million, indicating a year-over-year growth of approximately 11% at the midpoint.

The company anticipates a negative adjusted EBITDA of around $10 million for the first quarter of 2024.

Earnings are expected to be between 6 cents per share and 7 cents for the first quarter of 2024.

How Have Estimates Been Moving Since Then?

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

The consensus estimate has shifted -92.08% due to these changes.

VGM Scores

Currently, CoStar has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the lowest 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 belongs to the Zacks Computers - IT Services industry. Another stock from the same industry, Amdocs (DOX), has gained 3.2% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.

Amdocs reported revenues of $1.25 billion in the last reported quarter, representing a year-over-year change of +5%. EPS of $1.56 for the same period compares with $1.45 a year ago.

Amdocs is expected to post earnings of $1.58 per share for the current quarter, representing a year-over-year change of +7.5%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.5%.

Amdocs has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.

5 Stocks Set to Double

Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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