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CBRE Group (CBG) Up 10.2% Since Earnings Report: Can It Continue?

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Why Amgen (AMGN) is Poised to Beat Earnings Estimates Again

Amgen (AMGN) has an impressive earnings surprise history and currently possesses the right combination of the two key ingredients for a likely beat in its next quarterly report.

It has been about a month since the last earnings report for CBRE Group, Inc. CBG. Shares have added about 10.2% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is CBG due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

CBRE Group Beats Q4 Estimates on Solid Global Regions Growth

CBRE Group reported fourth-quarter 2017 adjusted earnings per share of 99 cents, beating the Zacks Consensus Estimate of 93 cents. The figure also marked a 6% increase from the prior-year quarter tally of 93 cents.

Results indicate strong revenue growth in all three of its global regions. Specifically, the company experienced solid growth in occupier outsourcing and leasing fee revenue, which increased 17% and 11%, respectively, in local currency.

On a GAAP basis, earnings per share came in at 49 cents compared with the prior-year quarter tally of 78 cents, reflecting the impact of the Tax Act.

The company posted revenues of around $4.3 billion, which beat the Zacks Consensus Estimate of $4.1 billion. It also compared favorably with the year-ago tally of $3.8 billion. Moreover, fee revenues were up 11% (9% in local currency) year over year to $3.0 billion.

For full-year 2017, adjusted earnings per share came in at $2.71, 18% ahead of the prior-year tally of $2.30. This was backed by 9% year-over-year growth in total revenues to $14.2 billion.

Quarter in Detail

CBRE Group’s largest business segment — The Americas — reported 11% rise (12% in local currency) in revenues from the prior-year quarter to around $2.3 billion, with robust growth in Canada, Mexico and the United States. Asia Pacific (APAC) witnessed 13% growth in revenues to $526.6 million (11% in local currency), with solid growth across the region and more pronounced in Australia, India, Japan and Singapore.

Revenues from the Europe, the Middle East & Africa (EMEA) segment rose 17% (9% in local currency) to $1.3 billion, backed by Spain and the U.K.’s performance.

In the Global Investment Management segment, revenues totaled $103.2 million, up 12% year over year (7% in local currency), while the Development Services segment reported revenues of nearly $32.3 million, up 60% year over year.

Liquidity

CBRE Group exited year-end 2017 with cash and cash equivalents of $751.8 million, down from $762.6 million as of Dec 31, 2016.

Outlook

CBRE Group expects 2018 adjusted earnings per share in the band of $3.00-$ 3.15, denoting a projected increase of 13% at the mid-point of the range. The company plans reinvestment of tax savings back into its business. Moreover, leasing revenue is expected to increase mid-single digits while capital markets revenue is projected to grow low to mid-single digits. The company expects occupier outsourcing fee revenue to increase solid mid-teens and adjusted EBITDA growth in Development Services and Investment Management businesses combined is estimated at low double-digit for the year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. There have been three revisions higher for the current quarter. In the past month, the consensus estimate has shifted by 18.2% due to these changes.

CBRE Group, Inc. Price and Consensus

CBRE Group, Inc. Price and Consensus | CBRE Group, Inc. Quote

VGM Scores

At this time, CBG has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for value and growth investors while momentum investors may want to look elsewhere.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise CBG has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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