Chicago, IL – October 16, 2024 – Today, Zacks Equity Research discusses Newmark Group, Inc. NMRK, Kennedy-Wilson Holdings, Inc. KW and RE/MAX Holdings, Inc. RMAX.
The Zacks Real Estate Operations industry constituents are poised to gain from the increased adoption of outsourced real estate services and emerging trends. The easing of monetary policy in many large markets is expected to result in a decrease in borrowing costs, more availability of credit and drive economic growth, in turn fueling transaction activity. Companies like Newmark Group, Inc., Kennedy-Wilson Holdings, Inc. and RE/MAX Holdings, Inc. are set to benefit from these positive trends.
However, the industry faces challenges such as macroeconomic uncertainty and geopolitical tensions. Customers remain focused on cost controls and for certain asset categories are delaying their decision-making with respect to leasing.
The Zacks Real Estate Operations industry comprises companies that provide leasing, property management, investment management, valuation, development services, facility management, project management, transaction and consulting services, among others. However, real estate investment trusts or REITs are excluded from this group.
Economic trends and government policies impact the real estate market (global and regional), which determines the industry's performance. Economic activity, employment growth, office-based employment, interest-rate levels, costs and availability of credit, tax and regulatory policies, and the geopolitical environment are the major factors shaping the real estate market's fate. Also, pandemic-induced public health challenges and geopolitical issues have affected property sales and the leasing lines of businesses.
Interest Rate Cut Provides Relief for Transaction-Based Business: The latest cut in the interest rates by the Federal Reserve and anticipations of future reductions are expected to drive transaction-based businesses in the United States. Along with the United States, the easing of monetary policy in many large markets is expected to result in a decrease in borrowing costs, more availability of credit, and drive economic growth.
This is expected to help investors in better price discovery and consequently result in reduced transaction completion times. It is also expected to lead to a rise in the average deal size, thereby bolstering the industry's near-term revenue prospects.
Outsourcing of Real Estate Needs to Remain Strong: Real estate occupiers, including corporations, public sector entities, healthcare providers, and those in finance, industry, life sciences and technology, are increasingly preferring to outsource their real estate needs. They are entrusting third-party real estate experts to enhance execution and efficiency. Organizations are seeking strategic advice to reimagine their workplaces and workstyles to foster culture, attract talent and improve performance.
These developments are creating opportunities for participants in the real estate operations industry. Major players in the industry are leveraging this transition, securing new clients and expanding relationships with existing ones. Also, companies in this industry continue to prioritize investments in technology as it consistently improves efficiency, delivers client services and supports market share growth.
Certain Real Estate Categories' Demand Hurt: The pandemic has significantly reshaped the use of commercial real estate. Also, economic uncertainty continues to affect real estate sales and leasing activities. While companies are promoting the return to office, this transition is gradual, which is hindering tenants' confidence in long-term commitments. As such, pre-pandemic office occupancy levels are likely to remain elusive in the near or intermediate term.
Amid a volatile environment and geopolitical issues, customers remain focused on cost controls and delaying their decision-making with respect to leasing. As such, industrial real estate demand remains subdued and this trend is expected to continue in the near term. Additionally, the pace of business-related travel and in-person interactions has not fully rebounded to pre-pandemic norms.
The Zacks Real Estate Operations industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #104, which places it in the top 42% of more than 250 Zacks industries.
The group's Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates robust near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry's positioning in the top 50% of the Zacks-ranked industries is a result of the upward earnings per share outlook for the constituent companies in aggregate. Looking at the aggregate earnings per share estimate revisions, it appears that of late, analysts are gaining confidence in this group's growth potential. Over the past year, the industry's earnings per share estimates for 2024 and 2025 have moved 46.8% and 37.2% north, respectively.
Before we present a few stocks that you may want to consider for your portfolio, let's take a look at the industry's recent stock-market performance and valuation picture.
The Zacks Real Estate Operations industry has outperformed the broader Zacks Finance sector and the S&P 500 composite over the past year.
The industry has advanced 40.8% during this period compared with the S&P 500's growth of 32.5% and the broader Finance sector's rise of 31.2%.
On the basis of the forward 12-month price-to-earnings, which is a commonly used multiple for valuing Real Estate Operations stocks, we see that the industry is currently trading at 17.06X compared with the S&P 500's forward 12-month price-to-earnings (P/E) of 22.08X. The industry is trading above the Finance sector's forward 12-month P/E of 16.66X.
Over the last five years, the industry has traded as high as 32.49X and as low as 11.45X, with a median of 17.26X.
RE/MAX Holdings: Headquartered in Denver, CO, it is a franchisor in the real estate industry. The company franchises real estate brokerages globally under the RE/MAX brand and mortgage brokerages within the United States under the Motto Mortgage brand. It also sells ancillary products and services, such as loan processing services, mainly to its Motto network.
RE/MAX is poised to benefit from its strategic growth initiatives. With its efforts to expand the mortgage business and its objective to maintain a strong liquidity position, RE/MAX is well-poised to ride the growth curve.
RE/MAX Holdings currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for the company's 2024 earnings per share (EPS) currently stands at $1.24. The stock has increased 20.8% in the past three months. You can see the complete list of today's Zacks #1 Rank stocks here.
Newmark Group, Inc.: Headquartered in New York City, Newmark is a leading commercial real estate services company that is rapidly expanding its presence globally. Together with its subsidiaries, Newmark Group advises and provides services to large institutional investors, global corporations and other owners and occupiers of commercial real estate.
With investments in talent and technology, the company is expected to experience decent performance going forward. It is poised to benefit from the opportunities from the large and highly fragmented market, institutional investor demand for commercial real estate and from the favorable trend toward outsourcing of commercial real estate services.
Newmark carries a Zacks Rank of 2 (Buy) at present. The Zacks Consensus Estimate for the company's 2024 EPS has remained unchanged at $1.15 over the past month. This also suggests 9.5% growth year over year. NMRK shares have gained 22.7% over the past three months.
Kennedy Wilson: Headquartered in Beverly Hills, CA, Kennedy Wilson is a global real estate investment company that invests in high-growth markets across the United States, the U.K. and Ireland. KW is engaged in the ownership, operation and investment in real estate on its own and through its investment management platform.
The company is expected to benefit from the continued growth of its investment management business and healthy demand for its high-quality multifamily and commercial portfolio.
Kennedy Wilson has a Zacks Rank of 2 at present. The Zacks Consensus Estimate for 2024 EPS has moved significantly upward over the past two months to $2.96. This suggests a notable increase year over year. The company's shares have appreciated 32.1% in the past six months.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report