Realogy (RLGY) Buy Rating Reiterated at Goldman Sachs

Goldman Sachs maintained a Buy rating on Realogy (NYSE: RLGY) with a reduced price target of $47.00 (from $53.00). Comments follow Q1 results. Analyst Eli Hackel thinks strong cash flow is too much to ignore despite the possibility of a slower ramp.

"Realogy reported a worse-than-expected quarter and gave a muted near term outlook on the call which drove the stock down 8.5% vs. the S&P 500 up 0.2% on May 5. Recent data points have delivered mixed signals concerning the housing market. For example, several builders indicated signs that the first time buyer is returning, while Realogy is taking a more cautious tone here. While predicting the exact pace of the housing recovery is challenging, what we strongly do believe is current conditions are below normal for several reasons. First, credit is still tight and should normalize as private capital returns, and we believe the possibility remains for Washington to take action. Second, inventory is tight and we believe should also normalize over time; at some point prices will rise to the point that sellers list and the new home build market drives additional inventory. Third, a job growth/wage growth recovery should help increase household formations that have lagged," said Hackel.

"For Realogy shares to work we believe the company only need deliver moderate sides and price CAGR over the next several years given the strong FCF characteristics and deleveraging. The recovery is not linear and 2014 has been below expectations. However, with shares of Realogy now down 22% for the year (S&P 500 up 2%) and trading at a 7%/10% 2014/2015 FCF yield we remain Buy rated," he added.

For an analyst ratings summary and ratings history on Realogy click here. For more ratings news on Realogy click here.

Shares of Realogy closed at $39.04 yesterday.

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