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What CoStar's and CoreLogic's Earnings Say About the Future of Real Estate Data in 2020

[Updated: Aug 07, 2020 ] May 04, 2020 by Marc Rapport
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Two of the major players on the digital and analytics side of the real estate industry are reporting strong earnings of their own and measured confidence about the months ahead.

CoStar Group (NASDAQ: CSGP) said its information and marketplace platforms -- including, CoStar, LoopNet, Lands of America, Realla, and Belbex -- hit a new high of 55 million unique visitors a month in the first three months of 2020, up from 49 million in the first quarter of 2019.

Pandemic-induced social distancing and shutdowns have paralyzed much of the market it serves, but the company's leadership says its business will be buoyed by its platforms' role as a replacement for the physical presence that's normally part of the buying and leasing process.

Meanwhile, CoreLogic (NYSE: CLGX), a provider of mortgage, insurance, and data solutions, including the closely followed Case-Shiller indexes, says it, too, had a record first quarter and expects continued refinancing activity to underpin its business as purchase mortgages fall because of the pandemic.

Here are highlights from each of their earnings reports for the first quarter of 2020, which began with the real estate industry on a roll and ended with the economy careening off the rails in the face of global pandemic.

Highlights from CoreLogic's quarterly reporting

CoreLogic said it recorded its best-ever first quarter results in 2020. Total company revenues were up 12% in the quarter, and quarterly EBITDA totaled $130 million.

The Irvine, California-based provider of financial, property, and consumer information, analytics, and business intelligence employs more than 5,000 people, 95% of whom, like CoStar employees, are working remotely.

CoreLogic said in a press release that revenue for the first quarter of 2020 was $444 million, up 6% from the $418 million recorded in the year-ago quarter, driven primarily by growth in its core mortgage, insurance, and spatial products. Adjusted earnings per share shot up to $0.76 from $0.31 in the first quarter of 2019.

In a Friday, May 1, earnings call, the company said it secured several major new client wins in the second quarter and captured market share that it expects to help with second-quarter earnings.

But the tide began turning as the pandemic grew. The company saw "business volume and revenue-related impacts" of approximately $6 million in March alone, primarily in its consumer credit business.

Despite that setback, company president/CEO Frank Martell said, results from its core mortgage businesses "surpassed underlying industry trends." And he said he expects refinancing in the U.S. mortgage market to be strong through at least the next several quarters and that it should provide "an important cushion for a likely decline in purchase transactions."

The CoreLogic chief executive added, "We expect purchase activity to soften considerably in the second and third quarters as the economic fallout from the COVID-19 pandemic becomes more pronounced. In light of the pandemic, it's too early to forecast full year 2020 mortgage volumes with a high degree of certainty."

Highlights from CoStar's quarterly reporting

Like CoreLogic, Washington, D.C.-based CoStar now has 95% of its workforce of about 4,200 people in the U.S., Canada, Europe, and Asia operating from home, and that company's chief executive noted that his firm got an early heads-up when the novel coronavirus arrived in Beijing, home to one of the firm's offices.

Founder and CEO Andrew Florance offers extensive insight and context during the earnings call his company conducted last Tuesday, April 28. We can only capture a few of the highlights here.

The company said that LoopNet had its best sales quarter yet and its second best, helping drive net income for the first quarter to $73 million, or $1.98 per diluted share. That particular metric is down from $2.33 a year ago and $2.39 a quarter ago, the company said.

But, Florance said in the earnings call, "The commercial real estate industry will continue to operate, and to do so, we'll need to sign and renew leases, find investment opportunities, value properties, dispose of properties, analyze markets, and very importantly, market vacancies to generate much-needed revenue."

And when people can't get together in person, digital marketing solutions and data become ever more important.

Florance also said that COVID-19 has created more economic uncertainty than he's seen in 34 years of running his company.

"Good thinkers I respect hold diametrically opposed outlooks," the CoStar founder and CEO said in the earnings call. "So, from where we stand today, it's essentially unrealistic to predict with certainty what we need, what the detailed consequences of this pandemic will be on our business over the year to come.

"So, we will provide guidance for the next quarter, but not the full year."

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Marc Rapport has no position in any of the stocks mentioned. The Motley Fool recommends CoStar Group. The Motley Fool has a disclosure policy.