Shares of CBRE Group Inc. CBRE have gained 1% in the past month, while its industry inched up 0.4%. Further, the trend in current-year earnings estimate revisions indicates a solid outlook for the company. The fundamentals appear solid for this Zacks Rank #1 (Strong Buy) stock and there is enough scope for its price appreciation in the near term.
Recently, CBRE announced that it has once again secured the top spot in the global rankings for commercial real estate investment activity for 2018. The data is as per Real Capital Analytics (RCA). This, in fact, is the eighth consecutive year of the company securing the first position. Per the RCA data, CBRE had 22.2% market share in 2018 across all property types on a global basis, which is a massive 800 basis points ahead of its closest competitor.
Moreover, CBRE has announced an encouraging outlook for full-year 2019. The company expects to achieve adjusted earnings per share of $3.50-$3.70 for the full year, which, at the mid-point of $3.60, denotes growth of around 10% from the prior year. Management expects its growth momentum to be supported by substantial operational gains and strategic investments across the company’s business.
Particularly, CBRE expects advisory fee revenues to be up 6-8% from the 2018 level. In the transaction businesses, management has guided for solid revenue growth and market-share gains. Leasing is expected to benefit from continuing economic expansion. Further, Global Workplace Solutions is expected to witness another year of double-digit revenue growth. Fee revenues are projected to be up 10-13% from the previous year.
In fact, CBRE Group has a robust scale as the largest commercial real estate services and investment firm (based on 2018 revenues). It is among the few companies offering a full suite of services to multi-national clients. Moreover, the company has grown organically and banked on strategic in-fill acquisitions to boost its service offerings and geographic reach.
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 more contractual. In fact, contractual revenues are projected to be 47% of its total fee revenues in 2019 compared with 19% in 2006. This makes the company resilient to market disruptions and positions it well to achieve both top and bottom-line growth even amid capital-market headwinds. Also, strategic reinvestment in its business, specifically on the technology front, is expected to set CBRE Group apart from its peers.
Further, occupiers of real estate are increasingly opting for outsourcing, and depending on the expertise of third-party real estate specialists to achieve improvement in execution and efficiency. With a market-leading position and being one of the few companies boasting occupier outsourcing capabilities on a global scale, CBRE Group remains well poised to bank on the favorable trends. Furthermore, the company continues to achieve diversification in terms of client-industry mix, which is impressive, while FacilitySource acquisition strengthened the company’s facilities-management capabilities.
The company enjoys strong cash flow, and has cash and credit facility capacity in total of $3.5 billion. Also, it has no debt maturities until 2024. In fact, it witnessed historical cash flow growth (three to five years) of 14.46%, which comfortably exceeded 12.83% growth registered by the industry. Also, its current cash-flow growth of 20.09% compares favorably with the 17.24% increase estimated for the industry. This adequate liquidity and cash flow offer the company a solid platform for growth.
Furthermore, CBRE Group’s return on equity is 23.93% compared with the industry’s average of around 5.12%. This shows that the company reinvests more efficiently compared to the industry.
Also, the trend in estimate revisions of current-year earnings per share indicates a favorable outlook for the company. In fact, the stock has seen the Zacks Consensus Estimate for 2019 EPS being revised upward nearly 3.5% in a month’s time.
Other Key Picks
Investors interested in the real estate industry can consider some other similarly-ranked stocks like Colliers International Group Inc. CIGI, HFF, Inc. HF and Jones Lang LaSalle Inc. JLL. Each of these stocks currently flaunts a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Colliers International’s Zacks Consensus Estimate for 2019 earnings moved 4.6% north to $4.59 in two months’ time.
The Zacks Consensus Estimate for HFF’s 2019 earnings moved up 4.2% to $2.76 over the past month.
The current-year earnings estimates for Jones Lang LaSalle climbed 2.6% in a week’s time to $11.63.
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