It’s been a month since Zillow Group’s (ZG) last earnings report, and shares have gained about 9% during that time, outperforming the S&P 500.
Will the recent positive trend continue leading up to the next earnings release, or is Zillow due for a setback? Before we dive into how investors and analysts have reacted recently, let’s take a quick look at the most recent earnings report to better understand the important catalysts.
Zillow: Q2 earnings exceed expectations, revenue increases year-on-year
Zillow Group reported strong results for the second quarter of 2024, with both revenue and earnings numbers beating the Zacks Consensus Estimate. The company saw year-over-year revenue growth, supported by strong momentum across all segments.
The company has a solid brand position in the residential real estate industry, with an average of 231 million monthly unique users across the Zillow ecosystem of apps and websites. Zillow’s advanced technologies such as Real Time Touring, Listing Showcase, Follow Up Boss CRM, and ShowingTime viewing software are becoming increasingly popular with real estate agents.
Net income
For the quarter, GAAP net loss was $17 million, or 7 cents per share, compared to a net loss of $35 million, or 15 cents per share, in the year-ago quarter.
On a non-GAAP basis, the company’s net income was $99 million, or earnings of 39 cents per share, identical to the year-ago quarter. Non-GAAP net income for the reported quarter beat the Zacks Consensus Estimate by 8 cents.
revenue
Quarterly net sales rose to $572 million from $506 million in the year-ago quarter. Healthy growth in the residential and rental segment boosted revenue. Revenue exceeded the Zacks Consensus Estimate of $540 million.
Residential real estate revenue was $409 million, up 8% from $380 million in the prior year quarter, supported by solid growth in the Premier Agent business. Growth in the new construction business, the nationwide expansion of Listing Showcase through ShowingTime+ and contributions from Follow Up Boss also supported net revenue in this business.
Rental revenue in the June quarter increased 29% year over year to $117 million. More multifamily and single-family listings, as well as improvements to Zillow’s rental marketplace to improve the rental experience, boosted revenue in this area.
The Mortgage segment generated revenue of $34 million, compared to $24 million in the year-ago quarter. This increase was driven by solid growth in purchase loan originations. However, the year-over-year increase in this segment was partially offset by a decrease in mortgage market revenue.
Further details
Gross profit for the second quarter was $442 million compared to $402 million in the year-ago quarter, with corresponding margins of 77% and 79%, respectively. Operating expenses for the quarter were $480 million compared to $469 million in the year-ago quarter. Adjusted EBITDA was $134 million, up from $111 million in the year-ago quarter, primarily due to higher than expected revenue in the retail banking business.
Cash flow and liquidity
Zillow generated $135 million in cash from operations in the first six months of 2024, compared to $193 million in the same period last year. As of June 30, 2024, the company had $1,181 million in cash and cash equivalents and $89 million in lease liabilities, net of the current portion.
outlook
For the third quarter of 2024, Zillow expects total revenue to be in the range of $545 million to $560 million. Residential revenue is expected to be in the range of $375 million to $385 million. Adjusted EBITDA is estimated to be in the range of $95 million to $110 million. Management expects double-digit revenue growth in 2024 with a modest increase in adjusted EBITDA margin, primarily driven by growth pillars.
How have the estimates developed since then?
Over the past month, investors have witnessed a downward trend in forecast revisions.
The consensus estimate has shifted by -140% due to these changes.
VGM results
Zillow currently has a poor growth score of F, but its momentum score is much better at C. The stock has a similar trajectory and received a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has a VGM score of F. If you are not focused on a strategy, this score may be of interest to you.
outlook
Estimates for the stock have generally been trending downward, and the magnitude of these revisions suggests a downward trend. Notably, Zillow has a Zacks Rank #2 (Buy). We expect the stock to deliver above-average returns in the coming months.
Performance of an industry player
Zillow is part of the Zacks Internet – Services industry. Over the past month, DoorDash, Inc. (DASH), a stock in the same industry, has gained 1.3%. The company reported its earnings for the quarter ending June 2024 more than a month ago.
DoorDash reported revenue of $2.63 billion in the last quarter, a change of +23.3% year over year. Earnings per share for the same period were -$0.38, compared to -$0.44 a year ago.
For the current quarter, DoorDash is expected to report earnings of $0.19 per share, representing a change of +200% from the year-ago quarter. The Zacks Consensus Estimate has changed +8.8% over the past 30 days.
The overall direction and magnitude of estimate revisions result in a Zacks Rank of #3 (Hold) for DoorDash. Additionally, the stock has a VGM Score of C.
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