Why Realogy (RLGY) Stock Is Down Today

NEW YORK (TheStreet) -- Realogy (RLGY) was falling -11.7% to $37.67 Monday after posting a larger-than-expected loss for the first quarter.

For the first quarter Realogy posted a loss of -32 cents a share, missing the Capital IQ Consensus Estimate of a loss of -21 cents a share by 11 cents. Revenue grew 4.5% from the year-ago quarter to $1 billion. Analysts expected revenue of $1.1 billion for the quarter.

Looking to second quarter of 2014, Realogy expects homesale transaction volumes of between -2% to 2%.

"Realogy achieved homesale transaction volume growth of 10% year-over-year in the first quarter, which is at the midpoint of our prior guidance range," chairman and CEO Richard A. Smith said in a press release. "Our volume growth was driven by a 13% increase in average sales price that was partially offset by a 3% decline in transaction sides. We saw two opposing trends in the first quarter that caused an overall shift in Realogy's mix of business resulting in a higher average sale price and reduced transaction sides."

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Separately, TheStreet Ratings team rates REALOGY HOLDINGS CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate REALOGY HOLDINGS CORP (RLGY) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio is very high at 2.08 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, RLGY maintains a poor quick ratio of 0.70, which illustrates the inability to avoid short-term cash problems.
  • RLGY has underperformed the S&P 500 Index, declining 11.68% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • REALOGY HOLDINGS CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, REALOGY HOLDINGS CORP turned its bottom line around by earning $2.96 versus -$3.73 in the prior year. For the next year, the market is expecting a contraction of 44.2% in earnings ($1.65 versus $2.96).
  • The gross profit margin for REALOGY HOLDINGS CORP is rather low; currently it is at 22.23%. Regardless of RLGY's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, RLGY's net profit margin of 25.68% significantly outperformed against the industry.
  • Net operating cash flow has significantly increased by 258.82% to $162.00 million when compared to the same quarter last year. In addition, REALOGY HOLDINGS CORP has also vastly surpassed the industry average cash flow growth rate of -70.61%.
  • You can view the full analysis from the report here: RLGY Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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