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CIBC Reduces PT On Firstservice (FSRV) To C$37 On Weak 1Q, Lowers EPS Estimates

 April 25, 2012 11:08 AM

(By Balachander S) CIBC World Markets Inc. lowered its price target and EPS estimates on FirstService Corp. (TSE: FSV) (NASDAQ: FSRV), saying the company's first-quarter results were weaker than expected.

"At current stock levels, FirstService represents a compelling opportunity, with investors buying Colliers and the residential property management division and receiving FAS as a free option," CIBC wrote in a note.

The brokerage maintained its "Sector Outperformer" rating and reduced price target on the stock to C$37 from C$40. CIBC also slashed 2012 EPS estimate for the company to US$1.77 from US$2.19 and 2013 EPS estimate to US$2.50 from US$2.60.

[Related -CIBC Lifts PT On Firstservice (FSRV) To C$40, Retains 'Sector Outperformer']

The company's Q1 revenue of $490 million was shy of consensus at $498 million and adjusted loss of $0.10 missed consensus estimated of $0.20, CIBC noted. The miss was caused primarily by FAS, as lower foreclosure volumes and increased pricing pressure led to a 640 bps margin decline Y/Y to 3.4 percent.

CIBC said Colliers saw strong traction in the U.S. in Q1, with revenue up 25 percent Y/Y due to market share gains as new hires became productive and increased traction from the corporate solutions offering. FirstService acquired Colliers UK in Q1, which should aid in the roll-out of the global services offering.

The brokerage expects volume weakness at FAS through 2012, although sees growth opportunities (shadow inventory, REO) in 2013 and beyond. 

[Related -Retail In The Spotlight]

Shares of the real estate-related services provider dipped 0.75 percent to trade at $27.95 on the Toronto Stock Exchange on Wednesday. On the NASDAQ, the stock fell 0.63 percent to $28.33.

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