Newmark Group Inc.’s shares surged 5.7% on Feb. 18 as the commercial real estate advisory company outpaced analysts’ expectations in the fourth quarter. Though industry volumes were impacted by the pandemic, capital markets performed well.
Newmark’s (NMRK) 4Q adjusted earnings dropped 43.4% to $0.30 per share on a year-over-year basis, but beat the Street estimates of $0.25 per share. Revenues declined 4.9% to $601.4 million versus the consensus estimate of $478.9 million.
The company’s adjusted EBITDA came in at $112.9 million in the quarter, down 34.3% year-over-year. Leasing revenues decreased 45% to $138.4 million, while capital markets revenues increased 15.3% to $190.3 million, driven by record investment sales volumes.
Newmark CEO Barry M. Gosin commented, “We continued to see improvement in the fourth quarter as our capital markets and debt origination volumes increased 21% to a record $32 billion.”
“We remain focused on increasing recurring revenues in Mortgage Servicing, Global Corporate Services, Property Management, and Valuation & Advisory. Additionally, we continue to expand our presence in key growth markets that are benefiting from demographic tailwinds. Based on the strong foundation we have built, Newmark expects to outperform as industry volumes recover,” Gosin added.
For 2021, the company expects double-digit revenue growth. The adjusted EBITDA margin is likely to expand more than 20%. On execution of cost savings initiatives, $60 million of permanent savings is anticipated. (See Newmark stock analysis on TipRanks)
Following the 4Q results, Raymond James analyst Patrick O’Shaughnessy increased the stock’s price target to $14 (51.7% upside potential) from $11 and reiterated a Buy rating. The analyst highlighted “better line of sight into the pace of the recovery for the CRE market, most notably a rebound in capital markets transaction revenues.”
Additionally, the analyst argued that “the accelerated receipt of NDAQ shares will provide Newmark with substantial liquidity over the coming quarters with which to aggressively repurchase shares, reduce debt, and pursue hiring and acquisitions.”
The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 2 Buys and 2 Holds. The average analyst price target of $9.81 implies 6% upside potential to current levels. Shares have gained 26.6% so far this year.
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