Jones Lang LaSalle Incorporated JLL, popularly known as JLL, is expected to benefit from the continued strength of its resilient lines of business and favorable outsourcing trends. However, persistent macroeconomic uncertainty remains a concern.
What’s Aiding JLL?
JLL has a broad range of real estate products and services as well as an extensive knowledge of domestic and international real estate markets, thus enabling it to operate as a single-source provider of real estate solutions. Its superior client services and strategic investment in technology and innovation are expected to help grow market share and win relationships. Strategic technology investments enable the company to navigate challenging times.
Moreover, JLL's diversified and resilient platform and cost-optimization efforts are expected to support its adjusted EBITDA. Given its strong performance in the first half of 2024, management projects 2024 adjusted EBITDA to be within the range of $1.0 - $1.2 billion, up from the earlier guided band of $950 - $1,150 million. We expect fee revenues to increase 3.7% and 8.1% year over year in 2024 and 2025, respectively. Adjusted EBITDA margin is projected to be 13.7% in 2024, 15.6% in 2025 and 17.4% in 2026.
JLL’s Work Dynamics segment is well-positioned to benefit from favorable trends in the outsourcing business. Corporations are looking for the company’s wide-ranging knowledge and the breadth of its services, including sustainability. In the post-pandemic period, the trend for organizations to outsource real estate services and seek strategic advice on reimagining their workspaces and workstyles to boost culture, attract talent and drive performance has gathered more strength.
Amid the rising trend of outsourcing real estate needs by companies, new contract wins and the expansion of services with existing clients are likely to aid JLL’s performance in the upcoming period. Considering its global platform capabilities, strong demand and a significant market opportunity, management remains confident about Work Dynamics’ revenue and profit growth opportunity over the coming years. We expect a year-over-year increase of 11.8% in Work Dynamics' total revenues in 2024.
JLL is focused on maintaining balance sheet strength and adequate liquidity to enjoy operational flexibility. The company exited the second quarter of 2024 with $2.45 billion of corporate liquidity and a net leverage of 1.7X. As of June 30, 2024, it had investment grade ratings of Baa1 from Moody’s and BBB+ from S&P Global, which highlight financial and balance-sheet strength, enabling it to borrow at a favorable rate. Hence, with a solid balance sheet, the company is well-poised to sail through challenging times and capitalize on solid opportunities.
Shares of this Zacks Rank #3 (Hold) company have gained 21.5% over the past three months, outperforming the industry’s 15.3% growth.
Image Source: Zacks Investment Research
What’s Hurting JLL?
Persistent macroeconomic uncertainty and geopolitical unrest have resulted in an uneven recovery in the global economy. Capital markets have also slowed down due to restrictive underwriting assumptions and rising debt costs amid a high-interest rate environment.
Occupiers continue to adopt a cautious approach under present market circumstances, awaiting greater price discovery and causing a delay in the closing timeline for transactions. As a result, an industry-wide slowdown in investment sales and leasing activity across several asset types has led to an underperformance in JLL’s transaction-based businesses in recent years. With subdued consumer and business sentiment expected in the near term, the company’s transaction-based businesses are likely to remain choppy.
Competition from other real estate service providers and institutional players on the international, regional and local ground is a concern for JLL. Also, some of them are larger on a regional or local basis or have a stronger position in a specific market segment or service offering. This could curb JLL’s ability to raise fees, affecting profitability.
Stocks to Consider
Some better-ranked stocks from the real estate operations sector are CBRE Group CBRE and Colliers International Group Inc. CIGI. Both CBRE Group and Colliers International have a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for CBRE Group’s current-year earnings per share (EPS) of $4.75 indicates a 23.7% increase year over year.
The consensus estimate for Colliers International’s 2024 EPS has increased 1.8% over the past two months to $6.12.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
