Credit Suisse Sees Weaker Margins Pushing Estimates Lower For Realogy

In a report published Thursday, Credit Suisse analyst Michael Dahl reiterated an Underperform rating and $37.00 price target on Realogy Holdings Corp. (NYSE: RLGY).

In the report, Credit Suisse noted, "We now expect '15 adj. EBITDA of $797 mln (from $811 mln), with a margin of 14.2% (from 14.5%), owing to the incremental discussion on cost inflation expected. This is consistent with guidance of 13.9%-14.2% margins assuming 6-8% transaction volume growth (we est. +7%). Mgmt. gave no updates on the current demand environment, leading us to maintain our '15 transaction volume ests. of +7% y/y (+6% for NRT and +7.5% for RFG, with NRT having a much larger impact on EBITDA), with sides +5% y/y and price +2%. Mgmt. continued to stress debt reduction as its top priority, with returning cash still currently restricted and even upon retiring restrictive debt, the company is targeting net debt/EBITDA of 3x before returning cash. We continue to model this as a 4Q'16 event, at the earliest."

Realogy closed on Wednesday at $45.15.