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Realogy Meets Tempered Views

Profits fall sharply due to the housing slowdown.

Investors were fearing for the worse in


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third-quarter earnings report. But the residential brokerage firm hit earnings estimates and maintained its guidance for the remainder of the year.

Realogy, which owns several notable franchises such as Coldwell Banker and Sotheby's International Realty, earned $87 million, or 34 cents a share in the third quarter. That was down sharply from earnings of $227 million, or 91 cents a share, a year earlier, reflecting the slowdown in U.S. home sales.

Adjusting for certain items, the company earned 52 cents a share, matching analysts' average estimate, according to Thomson First Call.

Revenue fell 16% to $1.73 billion, within the range that management had forecast.

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Realogy reiterated its full-year guidance, which it lowered in August, for revenue of $6.4 million to $6.7 billion and adjusted earnings of $1.44 to $1.76 per share.

After hitting a 52-week high of $27.67 last week, Realogy shares have since fallen 11% as investors cashed out some profits fearing that the company might report an ugly quarter.

Earnings were released after the market closed Wednesday. The stock closed down 4.4%, or $1.13, to $24.65 during the regular session.

Realogy was spun off from the conglomerate formerly known as Cendant this summer at $26 per share. The stock later plunged below $20 but eventually rebounded over the past month, helped by a 37 million share tender completed in October.

One fear among Wall Street analysts is that the stock will languish next year once Realogy's current 11-million-share buyback program is finished by the end of this year.

However, others have argued that the company's strong real estate broker brands and large amount of free cash flow make the stock attractive at current levels.

The company's prospects for 2007 also remain a question mark. Realogy has yet to give guidance for the year, and residential home sales continue to slow across the country.

On Realogy's conference call, management highlighted the fact that Fannie Mae is predicting a 6% dollar decline in housing sales next year, but cautioned that this shouldn't be construed as company guidance for 2007. Management said the company won't release 2007 forecasts until early next year.