Jones Lang LsSalle Earnings: Significant Declines in Global Transaction Volume in Brokerage Business

Narrow-moat-rated Jones Lang LaSalle’s, or JLL’s, first-quarter results were impacted by significant declines in global transaction volume. The company reported that global direct investment sales were down 54% in local currency during the first quarter, with the Americas down 61%, EMEA down 53%, and Asia-Pacific down 28%. Global office leasing volumes were also down 18% in the first quarter compared with the first quarter of 2022. In the industrial sector, gross leasing volumes in U.S. and EMEA were down significantly on a year-over-year basis and were also below their five-year historical averages. Industrial net absorption in the Asia-pacific region remained strong and was considerably above the five-year historical average. For context, the office and industrial sectors contribute approximately 85%-90% of leasing revenue. We think that the pressure on the brokerage business will intensify further this year given our macroeconomic outlook and rising interest rates.

The company reported adjusted net income of $31 million or $0.65 per share in the first quarter, down 81% compared with the $177 million or $3.47 per share reported in the first quarter of the previous year. The companywide fee revenue was up 15% in the current quarter compared with the previous year as it was reported at $1.58 billion. Adjusted EBITDA came in at $109 million, 61% lower compared with the first quarter of 2022. This resulted in an adjusted EBITDA margin of 6.6% for the quarter, down 780 basis points compared with the first quarter of last year on a local currency basis. The margin compression in the current quarter can be mainly attributed to significantly lower brokerage volumes and the inherent operating leverage in the business model of the company. We are maintaining our $205 fair value estimate for JLL after incorporating the first-quarter results.