We have recently lowered our recommendation on Jones Lang LaSalle Incorporated (JLL), a leading real estate investment trust (REIT), from Outperform to Neutral as we anticipate it to perform in line with the broader market.
Chicago-based Jones Lang is a premier full-service real estate firm that provides corporate, financial, and investment management services to corporations and other real estate owners, users, and investors worldwide. A broad real estate product and service range, and extensive knowledge of domestic and international real estate markets enable the company to operate as a one-stop provider of real estate solutions.
With about 180 corporate offices across the globe, Jones Lang operates in more than 750 locations in 60 countries. Jones Lang is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.7 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the largest and most diverse in the real estate sector with nearly $41 billion of assets under management.
Furthermore, Jones Lang continually invests in industry-leading research to identify emerging trends and anticipate future conditions to respond to the shifting market and business trends of its clients. This enables the company to develop new investment products and services tailored to the specific investment goals and objectives of its clients, thereby maintaining profitable long-term relationships during challenging market conditions.
However, Jones Lang depends on a vibrant global real estate market to fuel its growth engine. Although global real estate fundamentals are gradually picking up, transaction volumes are yet to reach their pre-recession peak values. As such, we remain circumspect about the long-term earnings prospects of the company.
In addition, given its international presence, Jones Lang often faces unfavorable foreign currency movements, impacting its top-line growth. The Real Estate Services business segment is also cyclical in nature and experiences fluctuations in revenue and operating margins. This in turn could negatively affect the long-term earnings expectations of the company.
Jones Lang presently has a Zacks #2 Rank that translates into a short-term ‘Buy’ rating, indicating that the stock is expected to perform above the overall U.S. equity market for the next 1–3 months. In contrast, we have an Outperform recommendation and a Zacks #1 Rank (short-term ‘Strong Buy’) for NorthStar Realty Finance Corp. (NRF), one of the peers of Jones Lang.
JONES LANG LASL (JLL): Free Stock Analysis Report
NORTHSTAR RLTY (NRF): Free Stock Analysis Report
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