Re/Max Holdings, Inc. presented at Bank of America’s Stock Conference on Tuesday. Company presenters were Dave Metzger, COO and CFO, and Peter Crowe, vice president of investor relations. The presentation and accompanying breakout session provided insights into the company s growth strategies, outlook for the housing market in general, and uses of free cash flow. In terms of the housing market, management commented that the last five months have shown pieces of positive momentum followed by times of slowness, which, in our view, is about as expected following first-quarter results.
Management commented, however, that it remains relatively optimistic as it relates to recent rises in existing home inventory (currently at roughly 5.9 months, which is closer to a normal market than at any point in recent memory), which should lead to greater transactions in coming quarters. More specifically, management highlighted its expectations for the third and fourth quarters of this year to show gradual improvements, with 2015 identified as the year the market moves to a better spot for more sustainable growth.
We view this as consistent with most expectations, but at the very least, a mild positive because it suggests market activity has likely bottomed with future quarters showing the path to a more sustainable recovery. In the context of a derivative, we view Re/Max s commentary on agent recruitment, market volumes, and 2015 expectations, as a mild positive for Realogy (RLGY $36.69; Outperform). More specifically, Re/Max, in our opinion, provided in greater detail its strategy of reacquiring independent regions and how these uses of capital can reinvigorate revenue and margin growth for the company.
Re/Max sounded a bit more optimistic as it relates to continuing conversations with current owners of independent regions as the housing market looks to be entering a multiyear period of sustained growth and current owners look to sell because of health, retirement, and other issues. We suspect Re/Max is constantly evaluating its repurchase options by having conversations with independent owners on a consistent basis, and with the company now newly public, we believe there is a higher likelihood than not that some of these conversations are moving relatively faster than they would have if Re/Max were still a private company.