Realogy is the biggest brokerage conglomerate in the country. And its stock is now worth $4.75.
Shares are down nearly 22 percent since the market opened after Realogy announced changes to a military referral program that will impact its 2020 earnings.
The change was disclosed in regulatory filings late Wednesday. In the filings, Realogy said it was ending its current military rewards program, offered through the United Services Automobile Association, a Texas-based financial services company that offers mortgages and insurance to active military personnel and veterans. Under the USAA program, members who enrolled got brokerage services via Cartus Corp., a Realogy subsidiary that works with companies to assist in employee relocations.
In place of the USAA program, Realogy said it would offer a new program for military personnel with similar benefits, including cash back on their deals.
But with bad news on the horizon for next year, Wall Street is again punishing Realogy with its checkbooks. As of 11 a.m. Thursday, the company’s market cap was $559 million — a massive drop from $967.4 million just three months ago. Its enterprise value, another measure of corporate value that takes debt into consideration, is currently $4.3 billion. By comparison, its rival Compass, the SoftBank-backed firm that’s widely expected to go public in the near future, was valued at $6.4 billion after raising $370 million in July.
Realogy shareholders have experienced a wild ride in recent months as investors react to the company’s efforts to stabilize its business, which has suffered in the face of competition, particularly from Compass. In July, shares plunged after Realogy filed a lawsuit accusing Compass of illicit business practices, including “predatory” recruiting and attempts at price-fixing.
Just a few weeks later, the stock shot up 25 percent after announcing a partnership with Amazon. (The “TurnKey” program connects buyers with Realogy agents and offers them $5,000 worth of Amazon products and home services.)
But analyst predictions that the bump would be short-lived turned out to be true.
In a statement, Realogy said that “USAA recently informed Cartus that it is discontinuing the existing USAA Real Estate Rewards Network” in order to focus on its banking, mortgage and insurance business.
“Cartus is pleased to continue to serve the extended military community with this new program,” the statement said.
In Wednesday’s regulatory filing, Realogy said Cartus closed around 80,000 sales in 2018 and 36,000 during the first half of 2019. Of that, it conceded, “the USAA program represented a significant portion” of Cartus’ business.
Although Realogy executives said they didn’t think the change would impact its 2019 financials, they projected “the USAA program discontinuation will likely have a material impact on earnings at Cartus.” That projection didn’t take into account any positives associated with the new program.
Earlier this month, Realogy said its second-quarter revenue was $1.7 billion, a 5 percent year-over-year decline. Net income was $69 million, compared to $123 million a year prior.