After abruptly getting out of the direct home-sales business, Zillow is focusing on its core business and beating Wall Street estimates.
Zillow Group Inc.’s revenue was slashed by nearly 90% in the first quarter of 2023, and that was on purpose.
Zillow Z, 8.63% ZG, 9.45% lapped the biggest quarter of the fire sale that erupted from the abrupt end to its home-flipping business with an earnings report Wednesday, which is why its sales total showed such a huge year-over-year decline. The $469 million in first-quarter net sales that Zillow reported, while down from $4.26 billion a year ago, easily topped FactSet’s average analyst estimate of $425 million in an uncertain residential real-estate environment.
The real-estate-services company’s earnings also healthily topped Wall Street’s expectations. Zillow reported a net loss of $22 million, or 7 cents a share, which grew to earnings of 35 cents a share after adjusting for stock compensation and other effects. Like its revenue total, Zillow’s earnings declined from last year, when the fire sale led to adjusted earnings of 55 cents a share, but was more than triple FactSet’s average analyst estimate of 11 cents a share.
Zillow stock jumped more than 4% in after-hours trading following the release of the results, after closing with a 1% decline at $42.40. Shares have gained 32.5% so far this year, as the S&P 500 index SPX, -0.71% has increased 7.3%
In a letter to shareholders, Chief Executive Rich Barton and Chief Financial Officer Allen Parker credited the strong showing to the changes made after jettisoning the house-flipping business, as well as consumer interest in checking out houses on their app and website amid low inventory of actual houses to buy.
“This outperformance is due to a combination of the work we’ve done since reorienting the company in early 2022 and favorable relative tailwinds in a tough housing environment,” they wrote. “The numerous incremental changes we have made are adding up to make an impact on our business.”
For the current quarter, executives guided for revenue of $451 million to $479 million, again staying ahead of Wall Street’s expectations. Analysts on average were projecting second-quarter revenue of $457 million, according to FactSet.
The company’s guide for adjusted earnings was a little lower than estimates, however, with executives guiding for adjusted Ebitda of $61 million to $81 million. Analysts on average were expecting $88 million, according to FactSet, but executives explained that they planned to spend more on advertising and increase hiring in the second quarter.
