Analyst Note| Suryansh Sharma |
No-moat-rated Cushman & Wakefield posted a good set of numbers in the first quarter, comfortably beating the FactSet consensus estimate of $0.23 per share with a reported adjusted EPS of $0.48. Fee revenue came in strong as the company reported first-quarter fee revenue of $1.7 billion, a 27% increase on a year-over-year basis. Fee revenue growth reflects strong brokerage activity in the first quarter with all segments reporting brokerage revenue higher than prepandemic levels. The company reported first-quarter adjusted EBITDA of $214 million, a 115% increase compared with last year. This resulted in adjusted EBITDA margins being reported at 12.6% in the first quarter, up 512 basis points compared with the previous year. The margin expansion over the past year is mainly a result of significant operating leverage in the company’s business model, and it reflects the buoyant transaction activity in the market. We are impressed by the company's ability to deliver in a favorable environment, however, we would like to point out that the increasing interest rate environment can pressure the transactional businesses of the company resulting in lower fee revenue growth and margin compression in the upcoming years. We are maintaining our $25.00 fair value estimate after incorporating the first-quarter results.