CBRE Group (CBRE) Q3 Earnings Beat on Resilient Business Growth
CBRE Group Inc.’s CBRE third-quarter 2023 core earnings per share (EPS) of 72 cents surpassed the Zacks Consensus Estimate of 65 cents. The quarterly revenues of $7.87 billion also compared favorably with the Zacks Consensus Estimate of $7.63 billion.
Results reflect growth in its resilient lines of business, led by Global Workplace Solutions (“GWS”).
However, on a year-over-year basis, the core EPS declined by 35.7%, while revenues increased 4.5%. Despite growth in GWS and other resilient businesses, commercial real estate capital markets were under significant pressure in the third quarter, leading to a continued slowdown in property sales and debt financing activity.
Net revenues decreased 4.2% (5.1% in local currency) year over year to $4.4 billion. Core EBITDA declined 28.1% (28.5% in local currency) to $436 million.
For the full-year 2023, CBRE now projects core EPS to decline by mid-30% compared with a 20-25% decline projected earlier, almost entirely for its interest-rate sensitive businesses. It anticipates 2023 to be its trough for earnings. However, it expects its resilient businesses to report double-digit growth and anticipates its record earnings to be pushed back a year relative to earlier projections.
Shares of CBRE were down more than 2% during the pre-market hours today.
Quarter in Detail
CBRE Group’s Advisory Services segment reported a year-over-year revenue decrease of 17.3% (17.6% in local currency) to $2.01 billion. Our estimate was pegged at $2.03 billion.
Global leasing revenues fell 16% (17% in local currency), with uncertainty in the economy continuing to delay occupier leasing decisions, mainly for large office and industrial deals. Global sales revenues fell 38% (39% in local currency), with buyers and sellers pausing amid sharply rising interest rates. Global mortgage origination revenues declined 18% (same in local currency) as most debt capital sources remained on the sidelines.
The GWS segment registered a year-over-year increase of 16.6% (15.2% in local currency) in revenues to $5.65 billion. Our estimate was pegged at $5.55 billion.
With significant new business and existing client expansions, Facilities management net revenues increased 14% (12% local currency). Also, due to solid growth in the Turner & Townsend and GWS Local businesses, Project management net revenues rose 15% (13% local currency). The pipeline achieved an all-time high, with endeavors spanning a wide range of sectors, most notably industrial and logistics, healthcare and energy, including first-generation outsourcers.
The Real Estate Investments segment experienced a decline of 18.4% (20.9% in local currency) in revenues to $210 million. Our estimate was pegged at $256.7 million. At the end of the third quarter of 2023, assets under management decreased by $3.4 billion from the second quarter of 2023 to $144.2 billion, reflecting lower asset values and adverse foreign currency movement.
In the third quarter of 2023, CBRE completed two in-fill acquisitions for a total of $8 million in cash and deferred consideration. These included one in Advisory Services and one in the GWS business.
Balance Sheet Position
CBRE Group exited the third quarter of 2023 with cash and cash equivalents of $1.25 billion, down from $1.32 billion as of Dec 31, 2022.
As of Sep 30, 2023, CBRE Group had $4.3 billion in total liquidity. This comprised nearly $1.3 billion in cash in addition to the ability to borrow a total of $3 billion under its revolving credit facilities, net of any outstanding letters of credit. The company’s net leverage ratio was 1.04 as of the same date, significantly less than CBRE’s primary debt covenant of 4.25X.
During the September-end quarter, the company repurchased 6.2 million shares for $516 million, with an average price per share of $83.03. As of Sep 30, 2023, it had $1.5 billion of stock-repurchase capacity remaining under its authorized buyback program.
Currently, CBRE Group carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CBRE Group, Inc. Price, Consensus and EPS Surprise
CBRE Group, Inc. price-consensus-eps-surprise-chart | CBRE Group, Inc. Quote
Upcoming Releases
It’s time to look forward to two stocks from the real estate operation industry — Jones Lang LaSalle Incorporated JLL and Cushman & Wakefield plc CWK. While Cushman & Wakefield is slated to report quarterly numbers on Oct 30, Jones Lang LaSalle is scheduled to come up with its figures on Nov 2.
The Zacks Consensus Estimate for Jones Lang LaSalle’s third-quarter 2023 EPS stands at $2.35, suggesting a year-over-year decrease of 30.9%. JLL currently carries a Zacks Rank of 5 (Strong Sell).
The Zacks Consensus Estimate for Cushman & Wakefield’s third-quarter 2023 EPS is pegged at 20 cents, implying a year-over-year decrease of 53.5%. CWK currently carries a Zacks Rank of 5.
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