The RMR Group reported better-than-expected revenues for 4Q. The real estate services provider’s 4Q sales of $150.1 million declined 5.7% year-over-year but exceeded the Street’s estimates of $137.5 million. Its adjusted earnings of $0.39 per share fell 33.9% from the year-ago quarter and came in-line with analysts’ estimates.
RMR’s (RMR) adjusted EBITDA grew 6.1% from the preceding quarter to $20.8 million in 4Q, while adjusted EBITDA margin of 48.8% expanded 170 basis points from the previous quarter. The sequential growth was “driven by an increase in management services revenues, as the majority of our Managed Equity REITs [real estate investment trusts] realized increases in fee paying assets under management, and the implementation of targeted cost containment measures,” said RMR’s CEO Adam Portnoy.
Portnoy added that “Despite the challenges presented by the ongoing pandemic, we believe our Client Companies have sufficient resources to weather near-term challenges. More specifically, at our Managed Equity REITs, rent collections remained strong, rent relief requests are declining and leasing activity is improving.” (See RMR stock analysis on TipRanks).
Following the 4Q results, Oppenheimer analyst Owen Lau said that “there is significant visibility on a base management revenue fee stream. Additionally, RMR can also generate incentive fees if its REITs outperform the benchmarks in a 3-year look-back measurement window.” However, Lau maintained a cautious Hold rating on the stock due to increased uncertainty related to COVID-19.
Currently, the other analyst covering the stock in the past three months, shares Lau’s outlook with a Hold rating. The average price target stands at $29.25 and implies downside potential of about 9.1% to current levels. Shares have declined by 29.5% year-to-date.
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