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Why Shares of Realogy Holdings Plunged Today

By Bram Berkowitz - Feb 23, 2021 at 4:24PM

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Earnings in the fourth quarter of 2020 missed expectations, while full-year earnings just beat. However, investors may be worried that the mortgage market has peaked.

What happened

Shares of the real estate brokerage and title and escrow company Realogy Holdings (RLGY -1.99%) plunged by more than 15% today after the company reported earnings results for the fourth quarter and full year of 2020.

So what

In the fourth quarter of 2020, Realogy, which franchises brokerage brands such as Century 21, Coldwell Banker, and Sotheby's International Realty, reported $0.16 earnings per share (EPS) on revenue of roughly $1.9 billion. Both numbers are up significantly from the fourth quarter of 2019.

Fourth-quarter operating earnings before interest, taxes, depreciation, and amortization (EBITDA) of $206 million increased by $80 million year over year. On an adjusted basis, Realogy's fourth-quarter EPS of $0.68 came up short of analysts' expectations by $0.03.

Picture of a home.

Image source: Getty Images.

On the year, Realogy reported a loss of $3.13 per share, down from a loss of $1.65 per share in 2019. Total revenue on the year and operating EBITDA grew by 6% and 23% from 2019, respectively. The widening loss in 2020 includes noncash impairment charges of $682 million largely attributable to the COVID-19 crisis.

On an adjusted basis, EPS of $2.01 beat analysts' expectations for the year by a penny.

Now what

Although revenue and EBITDA grew in the quarter and for the full year, many investors are worried the mortgage market, which Realogy's business is heavily dependent on, may have peaked in 2020.

Worries of inflation and sooner-than-expected rate hikes may be spooking investors, as both refinancing and purchase mortgage activity dries up in a rising-rate environment.

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