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Realogy misses estimates, posts $1 billion net revenue

Spring selling season fails to help

Realogy (RLGY) reported a first-quarter net loss of $46 million, or $0.32 per share, missing analyst expectations by $0.11. 

Additionally, Realogy's net revenue for first quarter 2014 hit $1 billion, a 5% increase compared to first quarter of 2013, also missing analyst consensus by $100 million. 

The net loss includes $70 million of interest expense, $46 million of depreciation and amortization expense and $10 million in pre-tax charges related to the repricing of its term loan and repurchases of $44 million of senior secured notes during the quarter.

Realogy's Adjusted EBITDA for first quarter 2014 was $53 million, down from $71 million in the first quarter of 2013, due to an approximately $20 million reduction in earnings related to the decrease in refinancing activity at its mortgage origination joint venture and within the company's title and settlement services segment.

And this is not estimated to end soon.

"This trend, which is expected to continue for much of 2014, along with a pause in the rate of growth in the housing recovery we are seeing this year, could make for challenging near-term comparisons, although current industry forecasts for 2015 are more favorable," said Richard Smith, Realogy's chairman, CEO and president.

Smith explained that the company witnessed two opposing trends in the market, causing an overall shift in Realogy's mix of business resulting in a higher average sale price and reduced transaction sides.

“Demand at the higher price points in markets served by our franchisees and company-owned brokerages was strong, while difficult credit standards and rapid home price appreciation, primarily caused by low inventory levels, constrained activity at the entry level of the housing market," Smith explained.

Looking ahead, the company expects homesale transaction volume in the range of -2% to +2% year-over-year in the second quarter of 2014.

"As we have moved into our spring selling season, thus far the level of open activity we expected has not materialized, particularly as it relates to homesale transaction sides," said Anthony Hull, Realogy's executive vice president, chief financial officer and treasurer.

"Having said that, we expect our aggregate number of homesale transaction sides to increase sequentially from 260,000 in the first quarter of 2014 to between 367,600 to 375,500 in the second quarter," Hull added. 

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