Shrinking Real Estate Market Prompts Compass Executives to Cut Forecast and Costs; Stock crashes

Shares in Compass Inc. plunged in after-hours trading on Monday after the real estate brokerage and technology provider slashed its annual revenue forecast and announced plans to cut costs due to a housing market downturn.

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Executives trimmed their annual revenue guidance by about $1.5 billion, with the current guidance calling for revenue of $6.15 billion to $6.45 billion after the previous guidance said $7.6 billion to $8 billion . Executives also said they expect to charge $320 million in annual recurring costs for upcoming cuts.

“Given the challenges the real estate market has faced so far this year and the likelihood that this challenging environment will continue for the foreseeable future, we are announcing a significant cost-cutting program,” Chief Executive Robert Reffkin said in a statement. “We are looking at all of the areas that will translate these savings into our spend, which we believe will allow us to be free cash flow positive in 2023. We expect to complete all targeted cost reductions by the end of this calendar year.”

Compass stock plummeted 11% in after-hours trading immediately after the results were released. Stocks are already down 48.5% this year, as is the S&P 500 index SPX,
has fallen by 10.2%.

For the second quarter, Compass reported a net loss of $101.2 million, or 24 cents a share, compared to a loss of 2 cents a share a year ago. Revenue rose to $2.02 billion from $1.95 billion a year earlier, but fell short of expectations. On average, analysts were forecasting a loss of 17 cents per share on sales of $2.11 billion, according to FactSet.

For the third quarter, Compass executives’ guidance was a far cry from Wall Street’s expectations. Executives expect an adjusted Ebitda loss of $65 million to $80 million on revenue of $1.4 billion to $1.5 billion, according to FactSet, while analysts average a positive adjusted Ebitda of $45 million and revenue of $2.11 billion forecast.

Compass executives scheduled a conference call at 4:30 p.m. Eastern Time to further discuss the results. Shrinking Real Estate Market Prompts Compass Executives to Cut Forecast and Costs; Stock crashes

Brian Lowry

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