Compass Stock Surges 30% Post-Earnings

Investors like the look of post-merger Compass.

Compass stock opened on Monday at $9.45, up 30 percent from the previous day’s close. It’s the company’s highest stock price open since March.

The stock bump followed Compass’ earnings call on Tuesday night, its first as a holding company after its landmark deal for Anywhere Real Estate, which brought on brands like Corcoran, Coldwell Banker and Century 21.

Part of the surge can be attributed to Compass outperforming analyst expectations for the quarter on both top-line and bottom-line growth. The firm reported a surprise profit of $22 million when analysts were expecting a small loss for the quarter, driven by a non-cash tax benefit of $401 million.

Its revenue of $2.7 billion also beat analysts’ estimate of $2.67 billion for the quarter. Compass also reported adjusted EBITDA of $61 million, nearly doubling its projection for the quarter.

But it may have been Compass’ efforts to find cost-cutting opportunities that have most excited investors.

The brokerage said it now expects to realize $200 million in cost savings in 2026, up from its initial projection of $100 million. The new projections were the “primary driver” for raising EBITDA estimates for 2026 by over $80 million, Needham analyst Bernie McTernan wrote in an analyst report.

CEO Robert Reffkin also touched on some of the company’s recent initiatives around listing access, like its partnership with Redfin and Midwest Real Estate Data, the Chicago area’s Multiple Listing Service operator.

In February, Compass announced a three-year partnership with Redfin in which the portal would display the brokerage’s “Coming Soon” listings. In the following weeks, a number of copycat partnerships emerged between Zillow and dozens of brokerages, as well as eXp Realty and Realtor.com and Homes.com. (Zillow and Realtor.com announced this week they would syndicate “Coming Soon” listings to each other.)

Reffkin took pains to differentiate Compass and Redfin’s agreement, saying that all leads go to the listing agent and listing agents are allowed to do showings. He also emphasized that the partnership enables agents to offer buyers 1 percent off on their mortgage.

Reffkin also spoke about its deal with MRED, which has started positioning itself as a national Multiple Listing Service. In April, Compass announced it would be syndicating its “Private Exclusive” and “Coming Soon” listings to the listing service.

“I want to create a national MLS to compete against local MLSs,” Reffkin said on the call.

The company also assuaged concerns about agent retention. Over half of the roughly 5,000 agents that left the brokerage in the quarter didn’t produce any gross commission income in the last 12 months.

“Going forward, our brokerage recruiting and retention strategy as a combined company will be focused on productive agents as well as up-and-coming agents,” Reffkin said.

Coming soon comparison

The results were the first look at a full quarter of the combined firms, and were skewed by a near doubling of revenue to $2.7 billion compared to the first quarter of last year. Compass’ $22 million net income included a non-cash tax benefit of $401 million and $183 million in expenses related to the $1.6 billion deal.

Pro forma results, which account for the size of both companies before the merger, reported by the firm showed more muted results after a year of Compass posting double-digit revenue growth. Its pro forma revenue grew 7 percent and its pro forma transaction count grew 2.6 percent, which still outpaced the market by over two percentage points.

Compass reported $61 million in adjusted EBITDA and ended the quarter with $484 million in cash and no balance on its revolver. Its total debt at the end of the quarter was $3.14 billion. Compass also reported free cash flow of $168 million.

On a pro forma basis, transactions from its franchise network were roughly flat. Franchise royalties per side were down 5 percent year over year to $438. Its title and escrow transactions were up over 13 percent annually to 31,698.

The company said it exceeded expectations with its cost-saving efforts, and now projects to realize $200 million in cost synergies for the year, doubling its previous estimate.

The company also reported losing agents on a pro forma basis. It was down to 84,187 at the end of the first quarter from 85,724 agents at the end of the fourth quarter for a retention rate of 94 percent.

Compass said over half of the more than 5,000 departing agents did not report any gross commission income in the last 12 months, and that its retention rate excluding that cohort was 98 percent.

The firm is projecting $4 billion to $4.2 billion in revenue for the second quarter and an adjusted EBITDA of $310 million to $350 million. The firm said it expects to be free cash flow positive for the year.

Compass stock was up almost 17 percent to $8.48 in after-hours trading.