A month has gone by since the last earnings report for CBRE Group (CBRE). Shares have added about 6.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is CBRE 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 catalysts.
CBRE Group's Q3 Earnings and Revenues Top Estimate
CBRE Group reported third-quarter 2019 adjusted earnings per share of 79 cents, beating the Zacks Consensus Estimate of 78 cents. Notably, the figure remained flat year over year. Results indicate strong revenue growth in the quarter. Particularly, global occupier outsourcing, U.S. property sales and commercial mortgage origination business lines were strong, though a light quarter of development asset sales partly muted the growth tempo.
The company generated revenues of around $5.9 billion, outpacing the Zacks Consensus Estimate of $5.7 billion. The revenue figure also compares favorably with the year-ago quarter’s reported tally of around $5.3 billion. Moreover, fee revenues were up 11% (12.8% in local currency), year over year, to $2.9 billion. However, adjusted EBITDA was edged down 1.9% (1% local currency) to $455 million.
Quarter in Detail
The company’s Advisory Services segment registered year-over-year revenue growth of 8.8% (10.2% local currency) to $2.2 billion. Global capital market revenues, which comprise both advisory property sales and commercial mortgage origination, were up 11% (13% local currency). This upswing was aided by solid growth in commercial mortgage origination revenues. Moreover, advisory property sales revenues registered an 8% (9% local currency) growth.
Advisory leasing revenues improved 4% (5% local currency). This upswing resulted from strong leasing in Australia, Brazil, India, Poland and the U.K. Moreover, leasing improved 4% in the United States.
Property and advisory project management revenues and fee revenues climbed 12% (14% local currency) and 6% (8% local currency), respectively.
Furthermore, Global Workplace Solutions segment registered an increase of 15.3% (17.5% local currency) in revenues to $3.5 billion. Strength across facilities management, project management and transactions business stoked growth.
The Real Estate Investments segment recorded 8.8% (11.6% local currency) growth in revenues. However, adjusted EBITDA tanked 83.5% (82.7% local currency), mainly due to the timing of large asset sales in the development business, which was particularly strong in third-quarter 2018, as well as higher investment in the company’s flexible workspace offering.
In-process development portfolio increased to $10.9 billion, up $0.3 billion from second-quarter 2019. There was a $1-billion increase in the pipeline during the third quarter to $3.5 billion. This indicates the fee development and built-to-suit projects.
CBRE Group exited third-quarter 2019 with cash and cash equivalents of around $577.5 million, down from $777.2 million as of Dec 31, 2018.
CBRE Group maintained its 2019 earnings guidance. The company projects adjusted earnings per share for the ongoing year in the band of $3.70-$3.80. This indicates an increase of 14% from the 2018 adjusted earnings per share at the mid-point.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
At this time, CBRE has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, 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.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision has been net zero. Notably, CBRE has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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