On Thursday, RE/MAX Holdings (NYSE: RMAX), a global real estate franchisor, was downgraded by Jones Trading from Buy to Hold. The decision comes in response to a challenging environment for domestic agent recruitment and higher interest rates that are likely to persist. The company's agent growth is expected to face continued pressure due to only a modest recovery in U.S. home sales volumes.
This is particularly significant as North American agents generate substantially more revenue than their counterparts in the faster-growing international segment, which could cause overall results to lag behind a quicker recovery.
RE/MAX reported its fourth-quarter 2023 adjusted diluted earnings per share (EPS) at $0.30, surpassing both the analyst's estimate of $0.25 and the consensus estimate of $0.29. Despite beating EPS estimates, the company recognized an impairment charge of $18.6 million due to a fair value adjustment to its mortgage unit and the closure of the Gadberry Group.
The real estate company has experienced trends similar to the broader industry, with a year-over-year decline in U.S. and Canada agent count by 4.2%. Yet, the total agent count saw a slight increase of 0.6%, bolstered by gains in international agents.
As the housing market continues to struggle, less productive agents may leave the industry, finding that their fees and dues are no longer justified by their earnings.
Revenue for RE/MAX, excluding marketing funds fees, fell by 5.8% year-over-year as of the fourth quarter of 2023. This decline was driven by a 5.6% drop in organic growth and a 0.2% negative impact from foreign currency movements.
In light of these challenges, Jones Trading has removed its price target on RE/MAX shares and will seek a more attractive valuation and improved stability in domestic agent retention and franchise sales growth before considering a more favorable rating.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.