A month has gone by since the last earnings report for Zillow Group (ZG). Shares have lost about 1.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Zillow due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Zillow Q1 Earnings Meet Estimates, Top Line Surges Y/Y
Zillow Group reported relatively healthy first-quarter 2024 results, with the top line beating the Zacks Consensus Estimate and the bottom line matching the same. The company witnessed a revenue expansion year over year, backed by strong momentum in all verticals.
It has a solid brand position in the residential real estate industry. The company boasts more than 217 million average monthly unique users across the Zillow ecosystem of apps and sites. Zillow’s advanced technology, such as Real Time Touring, Listing Showcase, Follow Up Boss CRM and ShowingTime touring software, are gaining strong popularity among real estate agents. However, a challenging macroeconomic environment remains a headwind.
Net Income
GAAP net loss in the quarter was $23 million or a loss of 10 cents per share compared with a net loss of $22 million or a loss of 9 cents per share in the prior-year quarter. The marginal increase in losses despite higher revenues was due to higher operating expenses.
On a non-GAAP basis, the company’s net income improved to $93 million or 36 cents per share from $87 million or 35 cents per share in the year-ago quarter. The bottom line matched the Zacks Consensus Estimate.
Revenues
Quarterly revenues increased to $529 million from $469 million in the prior year quarter. Healthy growth in the residential and rental segment boosted the top line. The top line surpassed the Zacks Consensus Estimate of $509 million.
Residential revenues witnessed a 9% increase from $361 million in the prior-year quarter to $393 million in first-quarter 2024, driven by healthy growth in Premier Agent Business. Growth in the New Construction business, expansion of Listing Showcase nationwide through ShowingTime+ and contributions from Follow Up Boss also supported net sales in this vertical.
Revenues in the rental segment witnessed a 31% rise to $97 million from $74 million in the previous-year quarter. The expansion in rental revenues was driven by solid growth in multifamily listings.
The mortgages segment generated $31 million in revenues compared with $26 million in the year-earlier quarter, backed by solid growth in purchase loan origination.
Other Details
During the quarter, Zillow recorded a gross profit of $406 million compared with $377 million in the prior-year quarter, with respective margins of 77% and 80%. The operating expenses during the quarter were $451 million, up from $422 million in the prior-year quarter. Adjusted EBITDA was $125 million compared with $104 million a year ago.
Cash Flow & Liquidity
In the first quarter of 2024, Zillow generated $80 million in cash from operating activities compared with $93 million a year ago. As of Mar 31, 2024, the company had $1.44 billion in cash and cash equivalents with $1 billion in convertible senior notes, net of current portion.
Outlook
For the second quarter of 2024, Zillow expects total revenues to be in the range of $525-$540 million. Residential revenues are expected in the band of $372-$382 million. Adjusted EBITDA is estimated to be in the range of $85 million to $100 million.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
VGM Scores
At this time, Zillow has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Zillow 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
Zillow is part of the Zacks Internet - Services industry. Over the past month, Alphabet (GOOGL), a stock from the same industry, has gained 3.3%. The company reported its results for the quarter ended March 2024 more than a month ago.
Alphabet reported revenues of $67.59 billion in the last reported quarter, representing a year-over-year change of +16.4%. EPS of $1.89 for the same period compares with $1.17 a year ago.
For the current quarter, Alphabet is expected to post earnings of $1.85 per share, indicating a change of +28.5% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.1% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Alphabet. Also, the stock has a VGM Score of D.
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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.
