- Oops!Something went wrong.Please try again later.
Shares of CBRE Group CBRE have had an impressive run in the past three months, appreciating 14.1% compared with its industry 3% growth.
Image Source: Zacks Investment Research
In July, the company came up with better-than-expected second-quarter results, highlighting benefits from diversifying across asset type, business lines, client type and geography, as well as expanding its resilient business in recent years. Capital market activities drove the Advisory Services segment’s recovery.
Recently, the company announced a definitive agreement to buy a 60% stake in Turner & Townsend, a U.K-based global leader in program, project and cost management. The transaction is likely to be immediately accretive to its earnings.
The fundamentals appear solid for this Zacks Rank #1 (Strong Buy) stock. Moreover, there is enough scope for the stock’s price appreciation in the near term. Let’s now delve deeper into its strengths.
Reasons to Buy CBRE
Robust Scale: As the largest commercial real estate services and investment firm (based on 2020 revenues), CBRE Group enjoys a robust scale. It is among the few companies offering a full suite of services to multi-national clients. In addition, the company has grown organically and banked on strategic in-fill acquisitions to boost its service offerings and geographic reach. With an expanded capability to service, this company’s number of large clients has increased significantly over the past few years. As large corporations continue seeking consolidation of the number of service providers, CBRE Group is likely to be a beneficiary of this trend.
Diversified and Contractual Revenue Base: CBRE Group has opted for a better-balanced and more resilient business model, in pursuit of which, it has shifted toward a more diversified and contractual revenue base in the past few years. This makes the company relatively resilient to market disruptions and positions it well to navigate even amid the pandemic-led turbulence. In fact, enhanced resiliency has aided its performance even amid the pandemic. Particularly, though transaction revenues were affected, broad diversification of both deal sizes and property types helped the company sail through the challenging times. However, things are now rebounding and in the second quarter, Capital market activities drove the Advisory Services segment’s recovery.
Occupiers Outsourcing Business: The company’s Global Workplace Solutions segment, which provides a broad suite of integrated, contractually-based services to occupiers of real estate, including facilities management, project management, transaction management and management consulting, is well poised to grow. Occupiers of real estate have been increasingly opting for outsourcing and depending on the expertise of third-party real estate specialists to achieve improvement in execution and efficiency.
As a result, CBRE Group has been witnessing continued momentum from both new and existing customers. High-quality client base is bumping up contractual revenues. The new business pipeline is gaining from client and property types, which are benefiting from secular shifts hastened by the pandemic. These includes life sciences, technology and logistics companies. Also, there is a rising demand for data-center management mix shift to higher margin services is aiding margin. For the GWS segment, management expects revenue to rise in high-single digit range and segment operating growth in high teens range in 2021.
Balance-Sheet Strength and High ROE: The company enjoys ample liquidity and low leverage level. As of Jun 30, 2021, it had $4.8 billion of total liquidity. The company’s net leverage ratio was (0.07x) as of the same date. This is significantly below CBRE’s primary debt covenant of 4.25x. Additionally, growth is expected to be further boosted by capital deployment focused on sectors and business lines that are poised to benefit considerably from secular growth trends. Furthermore, CBRE Group’s return on equity is 20.78% compared with the industry average of 3.52%. This shows that the company reinvests more efficiently than the industry.
Estimate Revisions: The upward trend in earnings estimate revisions for the current year indicates a favorable outlook for the company. The Zacks Consensus Estimate for 2021 earnings per share has been revised 19.9% upward in a month’s time. Given its progress on fundamentals and positive estimate revisions, the stock is likely to keep performing well in the quarters ahead.
Other Key Picks
Jones Lang LaSalle Incorporated JLL currently sports a Zacks Rank of 1. The consensus estimate for 2021 earnings moved 27.4% upward to $15.37 over the past week. The company’s shares have gained 26.1% over the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.
Brookfield Asset Management Inc. BAM carries a Zacks Rank of 2, at present. The Zacks Consensus Estimate for its ongoing-year earnings has been revised 1% upward to $2.17 in a month’s time. The stock has rallied 28% in the past three months.
eXp World Holdings, Inc. EXPI earnings estimate for the current year moved to 40 cents from 22 cents over the past week. Shares of this Zacks #2 Ranked company have surged 104.4% in three months’ time.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Jones Lang LaSalle Incorporated (JLL) : Free Stock Analysis Report
Brookfield Asset Management Inc (BAM) : Free Stock Analysis Report
Exp World Holdings, Inc. (EXPI) : Free Stock Analysis Report
CBRE Group, Inc. (CBRE) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research