Morningstar | While EMEA Is a Bit Soft, Jones Lang LaSalle's EBITDA Margin Goal Is Still Achievable
While Jones Lang LaSalle's second-quarter EMEA results were a bit low, it is still on track for its 2018 adjusted EBITDA margin goal and raised its overall forecast for the real estate industry. For the first half of 2018, the company reported net income of $148 million, or $3.23 per diluted share, on $7.5 billion of total revenue. Fee revenue, which primarily excludes offsetting revenue and reimbursed costs, for the first half increased 13% from the previous year to $2.8 billion and adjusted EBITDA increased 19% to $301 million. Jones has a goal of a 12% to 14% adjusted EBITDA margin for 2018 and is on track with a margin of 11.1% for the first half of the year and 13.1% in the second quarter. Given that the company also increased its forecast for the overall real estate sector to 0% to 5% from flat to down in leasing growth in the Americas and Asia-Pacific and to flat to down 5% from double-digit capital market declines in the Americas and EMEA, the year is progressing largely in line with, if not better than, management's original forecast. We don't anticipate making a material change to our $168 fair value estimate for wide-moat Jones Lang LaSalle.Out of the geographies, EMEA is the lagging. While Jones increased its forecast for all geographies, it still expects EMEA capital markets to be down 5% and EMEA leasing to have a gross absorption of 0% to negative 5%. Outside of the forecast, the company only generated $3.8 million of adjusted EBITDA on $739 million of revenue for the first six months of the year. Given the still overall negative EMEA forecast, partially driven by lower expectations for European Union GDP growth and reemerging Brexit worries, slack will primarily have to be made up for in the Americas, Asia-Pacific, and the investment management business.
Similar to peer CBRE, Jones has a relatively low net debt-to-adjusted EBITDA ratio of 1.2-times, and it may be a sign of conservatism while near a potential market peak.
Jones Lang LaSalle is a professional services firm that engages in real estate and investment management. The company delivers an array of services across four business segments. The company manage its Real Estate Services offerings across three geographic business segments: the Americas, Europe, Middle East and Africa (EMEA), and Asia Pacific, and the company manages its investment management business globally as LaSalle Investment Management. In its Americas, EMEA and Asia Pacific operating segments, the company provides a range of leasing, capital markets, integrated property and facility management, project management, advisory, consulting, valuations and digital solutions services.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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