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CBRE Group (CBRE) to Post Q2 Earnings: What's in the Cards?

Zacks Equity Research

CBRE Group, Inc. CBRE is slated to report second-quarter 2019 results on Aug 1, before the market opens. The company is anticipated to display year-over-year growth in both revenues and earnings.

In the last reported quarter, this Los Angeles, CA-based commercial real estate services and investment firm delivered a 33.9% positive earnings surprise. Results indicated stellar top-line growth, driven by leasing and occupier outsourcing.

In fact, CBRE has a decent record of earnings surprise, having surpassed estimates in each of the trailing four quarters, coming up with an average positive beat of 12.27%. The graph below depicts this surprise history:

CBRE Group, Inc. Price and EPS Surprise

CBRE Group, Inc. Price and EPS Surprise

CBRE Group, Inc. price-eps-surprise | CBRE Group, Inc. Quote

Let’s see how things are shaping up for this announcement.

Factors to Consider

CBRE Group has a broad range of real estate products and services, and an extensive knowledge of domestic and international real estate markets. The company has made concerted efforts to diversify its revenue base over the past years. It has opted for a better-balanced and more resilient business model, and in pursuit of this, shifted the business mix toward a more contractual one. This trend is expected to continue in the second quarter as well.

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, its number of large clients has increased significantly over the past years. This is likely to help drive CBRE Group’s top-line growth in the to-be-reported quarter.

Moreover, there is an increasing trend among occupiers of real estate, like corporations, public sector entities, health-care providers and others, toward the outsourcing of real estate needs. Particularly, companies are depending on the expertise of third-party real estate specialists for execution and efficiency improvement. With a market-leading position and being one of the few companies having occupier outsourcing capabilities on a global scale, CBRE Group remains well poised to bank on the favorable trends.

Amid these, the Zacks Consensus Estimate for the second-quarter revenues is currently pegged at $5.53 billion, indicating projected growth of nearly 8.2% year over year. Additionally, CBRE Group’s activities during the quarter gained analysts’ confidence. As a result, the Zacks Consensus Estimate for second-quarter earnings moved up a cent over the last 30 days to 80 cents. It also indicates a year-over-year increase of 8.1%.

Nonetheless, shift toward a comparatively lower-margin outsourcing business might strain the company’s margins. Also, the industry seems to be entering the later stages of its growth cycle. Further, global economic and geopolitical uncertainty is dampening business sentiment. Therefore, amid this environment, after recording decent growth for years, property sales volumes might be softer, given the cautious approach of investors, although there is ample availability of relatively low-cost financing.

Here is what our quantitative model predicts:

CBRE Group does not have the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for CBRE Group is 0.00%.

Zacks Rank: CBRE Group has a Zacks Rank of 2 (Buy), which increases the predictive power of ESP. However, we also need a positive ESP to be confident of a positive surprise.

Stocks That Warrant a Look

Here are a few stocks in the broader real estate sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:

Jones Lang LaSalle Incorporated JLL, scheduled to release earnings on Aug 6, has an Earnings ESP of +3.72% and carries a Zacks Rank #2, at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Mack-Cali Realty Corporation CLI, slated to report quarterly figures on Aug 7, has an Earnings ESP of +1.24% and carries a Zacks Rank of 3, currently.

Healthcare Realty Trust Incorporated HR, set to release June-end quarter results on Jul 30, has an Earnings ESP of +0.72% and currently holds a Zacks Rank #3.

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