Real estate firm JLL (NYSE:JLL) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 11.4% year on year to $5.63 billion. It made a non-GAAP profit of $2.55 per share, improving from its profit of $2.11 per share in the same quarter last year.
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JLL (JLL) Q2 CY2024 Highlights:
- Revenue: $5.63 billion vs analyst estimates of $5.63 billion (small miss)
- EPS (non-GAAP): $2.55 vs analyst estimates of $2.42 (5.2% beat)
- Gross Margin (GAAP): 50.2%, down from 52.2% in the same quarter last year
- Adjusted EBITDA Margin: 4.4%, in line with the same quarter last year
- Free Cash Flow of $235.7 million is up from -$720.7 million in the previous quarter
- Market Capitalization: $11.03 billion
"We are pleased with our second quarter results as Work Dynamics led strong resilient revenue growth and our transactional business lines benefited from investments we have made to take advantage of greater commercial real estate activity," said Christian Ulbrich, JLL CEO.
Founded in 1999 through the merger of Jones Lang Wootton and LaSalle Partners, JLL (NYSE:JLL) is a company specializing in real estate advisory and investment management services.
Real Estate Services
Technology has been a double-edged sword in real estate services. On the one hand, internet listings are effective at disseminating information far and wide, casting a wide net for buyers and sellers to increase the chances of transactions. On the other hand, digitization in the real estate market could potentially disintermediate key players like agents who use information asymmetries to their advantage.
Sales Growth
Examining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, JLL's sales grew at a weak 5.1% compounded annual growth rate over the last five years. This shows it failed to expand in any major way and is a rough starting point for our analysis. 
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. JLL's recent history shows its demand slowed as its annualized revenue growth of 2% over the last two years is below its five-year trend.
We can dig further into the company's revenue dynamics by analyzing its three most important segments: Work Dynamics, Markets Advisory, and Capital Markets, which are 69.9%, 19.2%, and 8.1% of revenue. Over the last two years, JLL's Work Dynamics revenue (operational workflows) averaged 9% year-on-year growth while its Markets Advisory (real estate insights) and Capital Markets (financial transactions) revenues averaged declines of 3.4% and 19.3%.
This quarter, JLL's year-on-year revenue growth clocked in at 11.4%, and its $5.63 billion of revenue was line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 10.7% over the next 12 months.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
JLL has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1.2%, lousy for a consumer discretionary business.
JLL's free cash flow clocked in at $235.7 million in Q2, equivalent to a 4.2% margin. This quarter's cash profitability was in line with the comparable period last year and above its two-year average.
Key Takeaways from JLL's Q2 Results
It was encouraging to see JLL top analysts' EPS expectations this quarter. On the other hand, its Work Dynamics segment underperformed. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on track. The stock remained flat at $231.99 immediately after reporting.
So should you invest in JLL right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.