Beat of the Week: Compass Shares Gain on Bigger Market Share, Improved Free Cash Flow

Compass shares gained last week after the money-losing residential real estate broker reported it gained market share in the first quarter, taking a bigger bite of a shrinking pie as a lack of homes for sale and elevated interest rates slowed transactions.

Compass also said free cash flow improved to negative $59 million in the first quarter, from $131.8 million a year earlier, and that the company would be free cash-flow positive starting in the second quarter. Compass shares gained 47% in the week, closing Friday at $3.66, bring their year-to-date gains to 56%.

The company reported a net loss of $0.33 per share, in line with the consensus forecast, according to analysts' estimates compiled by Visible Alpha. Revenue dropped 31% to $957 million as transactions declined 24 percent.

The company said it cut costs during the first quarter and increased its national market share to 4.5%, a gain of 17 basis points, even as the market shrank. The company said it processed almost 36,000 transactions in the first quarter, a drop of 24% from a year earlier, while transactions for the entire residential real estate market fell 26%.

"When the market improves in the future, we will be well-positioned for generating significant long-term profits," CEO Robert Refkin said on the company's earnings call. "As the No. 1 real estate brokerage by sales volume for the past two years in the United States, we have built a highly desirable company for attracting and retaining the best agents in the industry.