Marcus & Millichap (NYSE: MMI) reported Q1 EPS of $0.46, $0.08 better than the analyst estimate of $0.38. Revenue for the quarter came in at $174.5 million versus the consensus estimate of $160.83 million.

Business Outlook

We believe that the Company is positioned to continue to gain market share by leveraging a number of factors, including our leading national brand predominantly within our Private Client Market segment and specialty groups, experienced management team, infrastructure investments and proprietary technology. The size and fragmentation of the Private Client Market segment, in particular, continues to offer long-term growth opportunities with the top ten brokerage firms making up only 25.2% market share. This market segment consistently accounts for over 80% of commercial property sales transactions and over 60% of the commission pool. The Company’s growth plan also includes further expansion into various specialty property types such as hospitality, self-storage, seniors housing and the Larger Transaction Market segment, as well as expansion of its financing division, Marcus & Millichap Capital Corporation.

Key factors likely to influence the Company’s business in 2018 include:

Volatility in market sales and investor sentiment driven by:

• Slowdown in market sales in the short- to mid-term in view of a maturing cycle, rising interest rates, bid-ask spread gap between buyers and sellers and economic trends.
• Possible boost to investor sentiment and sales activity based on Tax Cuts and Jobs Act, regulatory easing and proposed economic initiatives which are expected to increase real estate demand.
• Experienced agents’ larger share of revenue production in a more challenging market environment resulting in a higher average commission payout.
• Volatility in the Company’s Middle and Larger Transaction Market segments.
• The potential for merger and acquisition activity and subsequent integration.

In addition, the reduction of MMI’s effective corporate tax rate to the 25.5%-26.5% range from nearly 40% in prior years as a result of the enactment of the Tax Cuts and Jobs Act may also affect the Company’s business in 2018. These factors, in addition to the business’s typical transaction closing date variability, highlight the importance of viewing the Company’s business through a long-term, at least annual, perspective.

For earnings history and earnings-related data on Marcus & Millichap (MMI) click here.