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Cushman & Wakefield (NYSE: CWK) Reports Solid Q2 Results and Announces CEO Succession by John Forrester

Fee revenue has fully recovered to beyond prepandemic levels, as the company reported second-quarter fee revenue of $1.6 billion, a 34% increase year over year and a 3% increase from the second quarter of 2019. Adjusted EBITDA also came in strong for the current quarter at $220 million, 26% higher than the second quarter of 2019. 

Adjusted EBITDA margin calculated on a fee-revenue basis was 13.5%, significantly higher than the 10.2% reported in 2020 and 11.1% in 2019. The adjusted EBITDA growth and margin expansion reflect the impact of strong brokerage activity and permanent cost reduction actions, which management believes amounted to around $30 million in the current quarter and will reach $125 million in annualized permanent cost savings.

The company announced that John Forrester, who is the current global president, will succeed Brett White as the new CEO of the company effective Jan. 1, 2022. White will remain executive chairman after the transition and continue to lead strategy, mergers and acquisitions, and succession planning, alongside Forrester. 

The brokerage segment of the company displayed excellent recovery in the current quarter compared with the second quarter of 2020, when the pandemic suppressed business around the world. Capital markets revenue more than doubled in the current quarter on a year-over-year basis and was 17% higher than the second quarter of 2019. Leasing revenue was 67% higher in the current quarter compared with last year, but it remains 9% below 2019 levels.

Management Anticipates Revenue Growth

The valuation and other segment remains a bright spot for the company as fee revenue came in 16% higher in the quarter on a year-over year basis. The property, facility, and project management segment, which has been resilient throughout the pandemic, reported a 7% year-over-year increase in fee revenue. Management anticipates revenue growth in midteens for the full year as brokerage revenue growth is expected to be up more than 30% and the nonbrokerage segment is expected to grow in midsingle digits. Management said it expects adjusted EBITDA margins for the full year to be well above 2020 levels and will approach 2019 levels, which equates to an adjusted EBITDA range of $660 million-$710 million for full-year 2021.

Company Profile 

Cushman & Wakefield is the third largest commercial real estate services firm in the world with a global headquarters in Chicago. The firm provides various real estate-related services to owners, occupiers and investors. These include brokerage services for leasing and capital markets sales, as well as advisory services such valuation, project management, and facilities management.

(Source: Morningstar)

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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Global stocks

Federal Realty Outperforms Our Expectations and Raises both 2021 and 2022 Guidance in Q2

 Re-leasing spreads continue to be strong despite the pandemic, seeing rents on leases signed during the quarter increase 7.5% with leases to new tenants up 10.2% over the prior rent. Second quarter rent collection improved to 94% compared with 90% in the first quarter and improved to 98% compared with 96% if rent abatement and rent deferral agreements are included. Improving rent collection drove same-store net operating income growth of 39.4% in the quarter, ahead of our 28.1% estimate in the second quarter. 

As a result, funds from operations came in at $1.41 for the quarter, above of our estimate of $1.25 in the quarter and well above the $0.77 figure reported in the second quarter of 2020 but still below the $1.60 level reported in the second quarter of 2019. The strong second-quarter results led to management significantly increasing its FFO guidance. Management raised its 2021 FFO guidance by $0.49 at the midpoint to a new range of $5.05-$5.15, which is slightly ahead of our current $5.02.

Additionally, management also raised their guidance for 2022 FFO by 25 cents at the midpoint to a new range of $5.30-$5.50. While the increase is encouraging, the updated range is still below our current $5.96 estimate for 2022. However, REITs rarely give FFO guidance for the next year this far out and, given the high level of uncertainty that still exists in retail, we suspect that management is being conservative with its 2022 estimates.

Company Profile 

Federal Realty Investment Trust is a shopping center-focused retail real estate investment trust that owns high-quality properties in eight of the largest metropolitan markets. Its portfolio includes an interest in 101 properties, which includes 23.4 million square feet of retail space and over 2,600 multifamily units. Federal’s retail portfolio includes grocery-anchored centers, superregional centers, power centers, and mixed-use urban centers. Federal Realty has focused on owning assets in highly desirable areas with significant growth, and as a result, the average population density and average median household income are higher for its portfolio than for any other retail REIT.

(Source: Morningstar)

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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Daily Report Financial Markets

USA Market Outlook – 9 August 2021

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Global stocks

Wide-Moat MercadoLibre Continued to Ride latin America’s E-Commerce Wave in Q2

Mercado Libre reported 94% revenue growth in the quarter, well above the 66% Factset consensus estimate. This result was impressive considering it faced unfavorable currency movement (currency-neutral revenue rose 103%) and last year’s 61% growth at the beginning of the pandemic.

 In its commerce business, the firm recorded gross merchandise value and items sold growth of 39% (46% currency-neutral) and 37%, respectively, above our full-year estimates of 35% growth for both. In fintech, total payment volume soared 72% against our 53% full-year forecast. Thus, while the comparisons will get more difficult in upcoming quarters, we now think the firm is likely to eclipse our 58% revenue forecast for the year.

Indeed, its operating expenses increased 79% from last year on ongoing investments in fulfillment and delivery speed, marketing, customer acquisition, and loyalty. Even so, MercadoLibre recorded a second-quarter operating margin of 9.8%, well above our full-year 3.6% estimate.

Company Profile 

Founded in 1999, MercadoLibre’s commerce segment (representing 64% of net revenue in 2020) includes online marketplaces in more than a dozen Latin American countries, display and paid search advertising capabilities (MercadoClics), online store management services (MercadoShops), and third-party logistics solutions (MercadoEnvios). Its fintech segment includes an online/offline payment-processing platform (MercadoPago), mobile wallet platform, credit solutions for buyers/sellers, and asset management offerings (Mercado Fondo). The company derives more than 95% of its revenue from Brazil, Argentina, and Mexico.

(Source: Morningstar)

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Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Daily Report Financial Markets

USA Market Outlook – 6 August 2021

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Daily Report Financial Markets

USA Market Outlook – 5 August 2021

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Global stocks Shares

Despite rising labour costs, UPS is poised for strong growth in 2021

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Fixed Income Fixed Income

TCW Core Fixed Income I (TGCFX)

while the more expensive N share class is rated Silver. This strategy is hemmed in compared with others they run given its 5% limit on high-yield corporate, and in practice it has had very little exposure there. As a result, the strategy outpaced 80% of peers in 2020, its best calendar year relative to peers since 2012. Among traditional core bond offerings, this is one of the best options available to investors.

Executing and refining

The strategy has long exhibited a strong balance between flexibility and discipline, while smaller, more recent improvements should continue to differentiate it from peers. As a result, its Process Pillar rating is upgraded to High from Above Average. This strategy is run by value investors looking to buy bonds when they’re cheap and sell them when they get expensive. They also dial risk up and down in a predictable fashion, and have made slight changes in recent years, such as an adjustment to more dynamically manage duration, which has resulted in the strategy being more competitive.

Back on defense

As of December 2020, the strategy’s largest allocation was to U.S. Treasuries, which soaked up 41% of assets. This was up dramatically from just a few months prior; Treasuries accounted for 30% of assets at the end of 2019 before managers drew down that stake to fund purchases during the sell-off, and by March 2020 it had fallen to under 9%. Agency mortgage-backed securities were the next-largest allocation at 30% of assets, a number that also moved around dramatically throughout the last year.

The managers dropped it to 5.2 years when the Fed cut rates in early 2020 but have since been increasing it as the economy and market recovered.

Rock steady

From January 2010 (the team’s first full month) through March 2021, the strategy’s institutional share class returned 4.3% annualized, beating roughly four fifths of distinct intermediate core bond peers; the peer group’s median return over the same period was 3.8%, while the benchmark Aggregate Index returned 3.7%. Though this strategy has less flexibility to invest in high-yield than Metropolitan West Total Return Bond (this one can own up to 5%, while its sibling can hold 20%), its overall positioning has mirrored the firm’s flagship strategy. Conservative positioning heading into 2020 led the strategy to hold up better than two thirds of distinct peers in the COVID-19 sell-off between Feb. 20, 2020, and March 23, 2020. As a result, the strategy beat out 80% of peers for calendar-year 2020.

(Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

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Global stocks Shares

CNH’s Second-Quarter Results Show Sales Growth Across All Segments; with Agriculture Continuing to Lead Profit Growth.

Looking across CNH’s end markets, we think agriculture demand will continue to be a major driver in the back half of the year. In our view, demand will be supported by strong crop exports to China. This dynamic has been a key reason why crop prices have been relatively high over the past year. Rising crop prices have propelled farmer incomes higher, allowing them to refresh their aging agriculture equipment–a benefit to CNH.

Overall, manufacturing sales reached $8.5 billion in the quarter, up 65% year on year. The strength in the company’s top line was attributable to increased volumes and favorable product mix. In agriculture, tractor sales worldwide were up 28%, compared with the prior-year period. Of that, high horsepower tractors (above 140 horsepower) saw strong volume growth in North America, surging 49% year on year. Combines also contributed to volume growth in the quarter, up 14% worldwide, with extraordinary growth in South America (up 38% year on year). CNH’s gross margins were also strong in the quarter, coming in at 19.3% as higher pricing more than offset cost inflation (due to supply chain constraints).

Company’s Future Outlook

Management reaffirmed its commitment to spinning off the on-highway business (commercial vehicles and power train businesses). Following the spin-off, CNH’s end market exposure will largely be focused on agriculture markets, with the balance in construction markets. We believe this is a good move for the company as the agriculture business has been fairly profitable for CNH. On average, its EBIT margins have been nearly twice the consolidated business’ EBIT margins. We estimate over 80% of EBIT will be coming from agriculture after the spin-off is completed, putting CNH on much better footing from a profitability standpoint.

Company Profile

CNH Industrial is a global manufacturer of heavy machinery, with a range of products including agricultural and construction equipment, commercial vehicles, and power train components. One of its most recognizable brands, Case IH, has served farmers for generations. Its products are available through a robust dealer network, which includes over 3,600 dealer and distribution locations globally. CNH Industrial’s finance arm provides retail financing for equipment and vehicles to its customers, in addition to wholesale financing for dealers; which increases the likelihood of product sales.

 (Source: Morningstar)

General Advice Warning

Any advice/ information provided is general in nature only and does not take into account the personal financial situation, objectives or needs of any particular person.

Categories
Daily Report Financial Markets

USA Market Outlook – 4 August 2021

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