Cushman & Wakefield Earnings: Near-Term Debt Maturities Refinanced as Outsourcing Growth Falters

No-moat-rated Cushman & Wakefield CWK reported lackluster third-quarter results as declines in commercial real estate transaction volume affected its brokerage business while growth in its outsourcing business faltered. We think the brokerage business will remain under pressure in the near term, given our macroeconomic outlook and rising interest rates. The company reported adjusted EPS of $0.21 in the third quarter, down from $0.43 in the year-ago period. Companywide fee revenue was down 11% on a local-currency basis compared with the previous year, reported at $1.59 billion. Adjusted EBITDA came in at $150 million, 27% lower compared with the third quarter of 2022 on a local-currency basis. This resulted in adjusted EBITDA margin of 9.4% for the quarter, down 192 basis points from the third quarter of last year. We are reducing our fair value estimate to $17 per share from $19 after incorporating a slower recovery in the brokerage business in the upcoming years and modeling slightly lower growth for the outsourcing business.

The company said it has refinanced $1.4 billion of debt that was maturing in 2025, using two new loans maturing in 2030 and 2031. Overall, the company has refinanced $2.4 billion of its $2.6 billion in debt that was expected to mature in 2025. The refinancing has drastically reduced market concerns related to liquidity if capital market conditions deteriorate even further in upcoming years. The updated debt maturity profile has around $200 million of debt maturing in 2025, which management expects to pay down, and then $650 million of maturities in 2028. The liquidity profile of the company remains comfortable, with $1.1 billion of undrawn credit facility and $0.6 billion of cash on the balance sheet.