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Why RE/MAX Holdings (RMAX) Q2 Earnings Could Impress

RE/MAX Holdings, Inc. RMAX — a real estate operations firm — is slated to report second-quarter 2017 results on Aug 3, after the market closes.

The company delivered a positive surprise of 2.56% in the preceding quarter.

In fact, it beat estimates in each of the trailing four quarters, with an average positive surprise of 6.15%. The graph below depicts this surprise history.
 

RE/MAX Holdings, Inc. Price and EPS Surprise

 

Note: The EPS presented in the above chart represents funds from operations (FFO) per share.

Factors to Influence Q2 results

RE/MAX Holdings enjoys an enviable global footprint. The company has a steady fee-based revenue model, with solid cash flow and margins.

RE/MAX Holdings boasts a highly-productive network of over 110,000 agents. Management expects the number of agents to rise 5.5–6.5% in second-quarter 2017 on a year-over-year basis, driven by strong agent growth outside the U.S. and Canada. This will likely have a positive impact on the company’s performance in the quarter to be reported.

Per management, the number of people using agents for housing transactions has increased. The company emphasizes on the prominent role of an agent in the housing market to drive its success. Increase in the agent network, strong demand from a gradually improving housing market and tight supply can help the company show progress.

Last year, RE/MAX Holdings launched a mortgage brokerage franchise – Motto Mortgage (Motto). Though Motto can cushion the company’s growth in unfavorable times, the expenses incurred to support its growth cannot be ignored. Moreover, RE/MAX Holdings is also incurring amortization expenses from the franchise agreements in its acquired regions.

Earnings Whispers

Our proven model does not conclusively show that RE/MAX Holdings will likely beat FFO estimates this time around. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. That is not the case here as you will see below.

(You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.)

Zacks ESP: RE/MAX Holdings has an Earnings ESP of 0.00%, as both the Most Accurate estimate and the Zacks Consensus Estimate are currently pegged at 49 cents.

Zacks Rank: RE/MAX Holdings’ Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat.

In addition, the stock has gained 3.8% year to date, underperforming 10.8% growth of the industry it belongs to.



 

Stocks That Warrant a Look

Here are a few stocks in the REIT space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:

Regency Centres Corporation REG, scheduled to release second-quarter results on Aug 3, has an Earnings ESP of +1.12% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CyrusOne Inc CONE, slated to release earnings on Aug 2, has an Earnings ESP of +2.70% and a Zacks Rank #2.

Piedmont Office Realty Trust, Inc. PDM, scheduled to release earnings on Aug 2, has an Earnings ESP of +2.27% and a Zacks Rank #3.

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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RE/MAX Holdings, Inc. (RMAX): Free Stock Analysis Report
 
Regency Centers Corporation (REG): Free Stock Analysis Report
 
Piedmont Office Realty Trust, Inc. (PDM): Free Stock Analysis Report
 
CyrusOne Inc (CONE): Free Stock Analysis Report
 
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