Jones Lang Misses by a Penny - Analyst Blog

Jones Lang LaSalle Inc. ( JLL ) reported modest results in fourth quarter 2012 with adjusted earnings of $2.60 per share, a cent short of the Zacks Consensus Estimate of $2.61 per share. However, adjusted earnings were ahead of $2.56 per share reported in the year-ago quarter. Quarterly results were benefited by decent growth in revenues but higher expenses acted as a dampener.

Revenues for the reported quarter were $1.25 billion, slightly above the Zacks Consensus Estimate of $1.21 billion and up 9% year over year. Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) came in at $185 million, reflecting a year-over-year increase of 3%.

Jones Lang's full year 2012 adjusted earnings of $5.48 per share were in line with the Zacks Consensus Estimate and exceeded the prior-year earnings of $4.83 per share. Full year 2012 revenues were $3.93 billion, slightly above the Zacks Consensus Estimate of $3.90 billion and improved 12% from the prior year. Adjusted EBITDA came in at $436 million, up 10% from a year ago.

On a GAAP basis, Jones Lang reported net income of $107 million or $2.38 per share, up from $85 million or $1.91 per share reported in the year-ago quarter. For full year 2012, the company's net income came in at $208 million or $4.63 per share, ahead of $164 million or $3.70 per share recorded in 2011.

Quarter in Detail

By segment, revenues from Jones Lang's Real Estate Services segment increased 9% from the prior-year quarter to $1.2 billion in the reported quarter.

Revenues from the Americas region came in at $550.0 million, a year-over-year increase of 9%, primarily driven by growth in revenue in leasing as well as Capital Markets & Hotels. Revenues in EMEA (Europe, Middle East, and Africa) increased 4% from the prior-year quarter to $352.2 million as leasing as well as project & development services revenues moved up in the reported quarter.

In the Asia-Pacific region, revenue during the quarter increased 18% year over year to $278.3 million, led by solid progress in revenue from categories such as Capital Markets & Hotels, Project & Development Services as well as Property & Facility Management.

Revenues from LaSalle Investment Management segment moved down 3% year over year to $64.6 million. This reflected a fall in advisory fees and equity earnings, partly offset by a rise in transactions fees and incentive fees. At quarter-end, assets under management were $47 billion.

Total operating expenses were $1.1 billion for the quarter, representing a year-over-year increase of about 7%. The hike was mainly driven by increases in variable compensation.

Balance Sheet Position

At year-end 2012, Jones Lang had an outstanding debt of $538 million, which decreased $105 million during 2012. Outstanding debt on long-term revolving credit facility was $169 million as of Dec 31, 2012, down from $463 million reported last year. Cash and cash equivalents at year-end 2012 were $152.2 million, down from $184.5 million at year-end 2011.

Our Viewpoint

Jones Lang, which operates as a single-source provider of real estate solutions with a broad range of real estate product and services, has an extensive knowledge of domestic and international real estate markets. In addition, Jones Lang has a strong balance sheet that enables it to continually invest in value drivers that act as key differentiators against tough competition.

Moving forward, Jones Lang's management is confident of continuing with its winning streak in 2013 with a healthy pipeline, modestly improving global market dynamics, sustained market share gains, and disciplined cost management efforts.

We believe that the company is well on course to continue to post improving performance in the coming quarters. Yet, with a relative decline in real estate fundamentals, demand for Jones Lang's services has decreased compared to the pre-recession levels, which is a cause of concern.

Jones Lang currently has a Zacks Rank #3 (Hold). A number of companies that are performing better and are worth a look in the same industry include E-House (China) Holdings Limited ( EJ ), IFM Investments Limited ( CTC ) and PennyMac Mortgage Investment Trust ( PMT ), all carrying Zacks Rank #2 (Buy).

IFM INVEST-ADS (CTC): Free Stock Analysis Report

E-HOUSE CHINA (EJ): Free Stock Analysis Report

JONES LANG LASL (JLL): Free Stock Analysis Report

PENNYMAC MORTGE (PMT): Free Stock Analysis Report

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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.

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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