CBRE Group Scaling New Highs


CBRE Group Inc. (CBG) is riding high on the growth trajectory. Its shares scaled a new 52-week high, touching $32.06 during the trading session on Jun 30. The closing price of $32.04 of this stock reflected a strong year-to-date return of over 21%. The trading volume for the session was nearly 2.7 million shares.

The solid momentum in its price followed the recent upgrade in its rating by Standard & Poor’s Rating Services (S&P) as well as CBRE’s retention by CommonWealth REIT’s (CWH) for managing the latter’s 42.9 million-sq.-ft. property portfolio in 31 markets.

Despite its strong price appreciation, this Zacks Rank #1 (Strong Buy) stock has plenty of upside left, given the improving operating environment, diverse revenue base and its long-term expected growth rate of 13.5%.

Growth Drivers

On Jun 19, ushering in good news for CBRE, Standard & Poor’s Rating Services (S&P) raised its rating on the company’s debt. Specifically, the company’s secured debt rating has been raised to investment grade, BBB- from the earlier rating of BB while its unsecured debt rating was also enhanced to BB from B+.

Moreover, CBRE’s enterprise rating has been increased to BB+ from BB with a positive outlook. CBRE’s conservative financial management as well as a hike in contractual revenue were appreciated by the rating agency and cited as the reason for the upgrade. (read: Another Rating Upgrade for CBRE Group).

On Jun 23, CBRE Group also disclosed its appointment by CommonWealth REIT for managing the latter’s 156 owned properties, spanning 42.9 million sq.-ft. in 31 markets. This appointment is scheduled to be effective on or around Oct 1, 2014. The assignment gain mirrors CBRE’s technical expertise and on-the-ground resources.

Apart from this, in April, aided by higher revenues, CBRE reported first-quarter 2014 adjusted earnings of 25 cents per share, well ahead of the Zacks Consensus Estimate of 17 cents per share and up 56% year over year. The company experienced solid contributions from the acquisition of U.K.-based commercial building technical engineering services provider Norland Managed Services Ltd.

With market conditions continuing to improve, we believe that opportunistic acquisitions would serve as growth drivers, supplementing the company’s organic growth. Improving property sales, leasing and outsourcing business also augur well going forward.

Echoing similar sentiments about the company, we notice that over the last 60 days, the Zacks Consensus Estimate for full-year 2014 and 2015 experienced positive revisions. They now stand at $1.60 and $1.82 per share for 2014 and 2015, respectively, and reflect a year-over-year increase of 12.1% and 13.7%.

Other Stocks to Consider

In addition to CBRE, RLJ Lodging Trust (RLJ) and UDR Inc. (UDR) scaled 52-week highs on Jun 30.

Read the Full Research Report on CBG
Read the Full Research Report on RLJ
Read the Full Research Report on CWH
Read the Full Research Report on UDR

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