CoStar Delivered a Good Quarter With the Multifamily Business Returning to Double-Digit Growth

Wide-moat-rated CoStar Group reported a decent set of numbers in the third quarter as the firm reported non-GAAP earnings per share of $0.30, 20% higher than the $0.25 in non-GAAP EPS during the third quarter of 2021. The company's shares gained 9% in response to the quarterly results. Overall revenue increased 11.6% on a year-over-year basis, and the adjusted EBITDA margin was recorded at 27.4% for the quarter. Annualized net new sales bookings, an indicator of future revenue growth, came in at $76 million for the third quarter, a 62% increase over the same quarter in 2021. Management has also increased its revenue and adjusted EBITDA guidance on the back of strong results with updated full-year revenue guidance of $2.175 billion to $2.180 billion and adjusted EBITDA guidance of $665 million to $670 million, representing an increase of $5 million and $48 million, respectively, at the midpoint of the range compared with previous guidance. The substantial increase in adjusted EBITDA guidance is mainly because of the lower investments in the firm’s residential business than previously anticipated. We are maintaining our $73 fair value estimate for Costar Group after incorporating the third-quarter results.