What happened
Realogy Holdings Corp (HOUS 1.12%) reported its third-quarter 2017 earnings today, and it's fair to say that investors were disappointed with the results. As of 10 a.m. EDT, the stock had fallen by 10%.
Specifically, the company's earnings not only missed expectations but unexpectedly dropped year over year. The company reported $0.70 per share for the quarter, down from $0.74 a year ago and 12.5% less than the $0.80 that analysts had been expecting.
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So what
Perhaps even more alarming is that earnings fell while revenue increased by nearly 2% from last year, indicating that the company's expenses have climbed. And this is exactly what management said.
According to Richard A. Smith, Realogy's chairman and CEO, "While we experienced gains in both homesale transaction volume and revenue operating EBITDA was adversely affected by the higher commission splits, hurricanes, and weaker Cartus results." (Cartus is Realogy's division that provides relocation services to corporate and affinity clients.)
Now what
Realogy, which is the nation's largest full-service residential real estate services company, acknowledged that the overall U.S. housing market had showed signs of softness. It remains to be seen whether the softness was a temporary consequence of disruptions (like the hurricanes) or is going to be a lingering issue that will depress earnings for an extended period of time.
The company says it is focused on driving organic growth, and that it is making progress with its agent-recruitment efforts. We'll have to wait for the fourth-quarter report to see if investors should be worried about the current real estate environment and its effects on Realogy's growth initiatives.
