(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.
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.
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.