Howard Lutnick's Prognostications After Newmark Went Public Have Not Aged Well

In early 2018, not long after Newmark Group went public with a whimper rather than a bang, Chairman Howard Lutnick predicted that the company would be top of the heap in CRE in a year.

"Call me back next year and talk about Newmark," Lutnick told CNBC. "Newmark will be the far best-performing real estate services company in the United States of America. It won't be close."

Now, a little more than a year later, Newmark stocks still languish.

Newmark shares sold for about $14 at the time of the initial public offering. Afterward, there has been a slow but steady drop. As of Tuesday, Newmark shares were trading at $9.24.

That is in contrast to other real estate service companies in the same league, such as CBRE Group and JLL, whose shares are near record highs these days, The Wall Street Journal reports.

CBRE, which was at about $47/share a year ago, now trades at over $50/share, though the price dipped below $40/share briefly during 2018. Five years ago, CBRE consistently traded at less than $40/share and sometimes less than $30/share.

What gives with Newmark? According to the WSJ, investors look askance at the company for a number of reasons, though not its fundamental strength as a real estate player.

For one, Newmark excludes stock-based compensation from the financial results it publishes. Investors also seem wary of Lutnick’s control through a special class of voting stock, as well as his compensation as chairman, which was $7.5M in 2017.

Moreover, not everything about the company's most recent quarterly numbers, released last month, was positive. Newmark projected that 2019 earnings would stay relatively flat at $1.55 to $1.65/share, compared with $1.52/share in 2018.

Naturally, Newmark execs accentuate the positive when it comes to the company's outlook.

"Our strong performance in the fourth quarter capped a year of exceptional growth, as we generated strong double-digit increases in revenues, pre-tax earnings and adjusted EBITDA in 2018," CEO Barry Gosin said during the company's conference call. "We're winning market share. We've hired really great people."

Newmark was indeed able to lure a group of managing directors from rival brokerage Eastdil Secured last summer to run its hotel capital markets group in one of its first major poaches since it went public.

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