Did REA Group’s first-half result meet expectations?

REA Group (ASX: REA) reported its first-half FY25 earnings, slightly ahead of consensus expectations. Here’s what you need to know.

1H25 Earnings Summary

Source: REA Group, VA Consensus

Management Comments

Healthy listings environment: "Vendors remained confident during the half with sales volumes consistently higher than the prior year, demonstrating the depth of demand, while buyers benefitted from more choice and some moderation in price growth."

Positive macro drivers: "Strong employment, high immigration levels and expectations for interest rate cuts in the first half of 2025 continue to support buyer demand and vendor confidence to list."

Strong start to the year but cycling high comps: "January National residential new Buy listings were up 3% YoY, with Sydney increasing by 5% and Melbourne declining by 2%. As previously flagged, YoY growth rates for the second half of the financial year will reflect very strong prior period listings volumes, particularly for Melbourne and Sydney."

FY25 outlook: "Our expectation for double-digit FY25 residential Buy yield growth remains unchanged ... We continue to target positive operating jaws in FY25. Low double-digit group core operating cost growth is now anticipated, compared to high single-digits previously."

Key Takeaways

REA delivered a strong result, slightly beating consensus across most key metrics. However, the dividend came in softer than expected, and expenses were marginally higher.

"This is a good result, with a solid start to 2H25 somewhat offset by higher operating cost guidance. Given the stock’s strong performance leading into the result, we expect it to trade in line with the market today," said E&P Capital analyst Entcho Raykovski.

It’s worth noting that REA is trading at its most expensive level in nearly four years, with a price-to-earnings ratio of 109. While the earnings were solid, the valuation remains a key concern.

Outlook and CEO Change

While REA’s guidance was broadly positive, a few headwinds stand out:

• Higher costs: Core operating expenses are now expected to grow in the low double digits, versus prior guidance of high single digits.

• Challenging YoY comparisons: 2H25 growth rates will be cycling an exceptionally strong prior period.

• Associate losses: FY25 associate losses are now expected to be slightly higher YoY, compared to prior guidance of modestly lower losses.

• CEO transition: CEO Owen Wilson announced plans to retire later this year

"While Owen is highly regarded, the strength of REA’s business model should sustain a CEO transition," said Raykovski.

Wilson currently owns approximately 68,800 REA shares (~$17 million), which is relatively modest compared to founder-led peers like Wisetech and Netwealth.

The Bottom Line

REA delivered a strong result, but with the stock trading at a premium, any weaknesses—such as higher costs and tough YoY comparisons—tend to get magnified. The company's fundamental momentum remains intact, but valuation concerns could weigh on near-term gains.