CBRE Group (CBRE) Q4 Earnings, Revenues Beat Estimates

CBRE Group Inc. (NYSE:CBRE) reported fourth-quarter 2018 adjusted earnings per share of $1.21, comfortably beating the Zacks Consensus Estimate of $1.13. The figure also compares favorably with the prior-year tally of 96 cents.

Results indicate strong revenue growth, driven by leasing and occupier outsourcing. Reflecting upbeat market sentiments, the company’s shares are up more than 4% in today’s pre-market trading.

On a GAAP basis, fourth-quarter earnings per share came in at $1.15, indicating a substantial year-over-year jump from 47 cents.

The company posted revenues of around $6.3 billion, which beat the Zacks Consensus Estimate of $5.9 billion. It also compares favorably with the year-ago tally of $5.5 billion. Moreover, fee revenues were up 16% (18% in local currency) year over year to $3.4 billion, while organic fee revenues climbed 13% (15% local currency).

CBRE Group reported year-over-year leasing revenue growth of 22% (24% local currency), backed by double-digit increases across all three regions. Global occupier outsourcing revenues increased 14% (17% local currency), while fee revenues jumped 17% (20% local currency). This was driven by double-digit growth in occupier outsourcing revenues and fee revenues by all three regions.

In addition, combined capital markets businesses, which include property sales and commercial mortgage origination, reported revenue growth of 9% (11% local currency). Furthermore, global property sales revenues climbed 7% (10% local currency), with all three regions reporting market share gains.

For full-year 2018, the company reported adjusted earnings of $3.28 per share, well above the prior year’s $2.73. This was backed by an increase of 15% (14% local currency) in revenues that aggregated $21.3 billion.

Quarter in Detail

CBRE Group’s largest business segment — The Americas — reported 14% rise (15% in local currency) in revenues from the prior-year quarter to around $3.9 billion, registering growth in the United States. The APAC segment witnessed revenue improvement of 9% (14% local currency) from the prior-year quarter to nearly $643.9 million, with healthy growth in Greater China, India and Japan.

Revenues from the EMEA segment rose 18% (23% in local currency) to $1.6 billion, supported by encouraging performance in Belgium, France, Germany and the U.K.

In the Global Investment Management segment, revenues totaled approximately $118.7 million, up 15% year over year (18% in local currency), while the Development Services segment posted revenues of nearly $32.8 million, up 2% year over year (same in local currency).

Liquidity

CBRE Group exited fourth-quarter 2018 with cash and cash equivalents of around $777.2 million, up from $751.8 million as of Dec 31, 2017.

Amid volatility in the equity markets, the company bought back more than $200 million of its stock, acquiring 5.1 million shares at an average price of $40.20 per share, during the fourth quarter and through early January 2019.

Our Viewpoint

CBRE Group’s better-than-expected fourth-quarter results are encouraging. Notably, extensive real estate products and services offerings, improving leasing and outsourcing business, strategic in-fill acquisitions, transformational deals and healthy balance sheet are expected to be conducive to long-term results.

However, with a shift toward a comparatively lower margin business, its margin is likely to be affected in the near term. Also, commercial real estate industry seems to be entering the later stages of its growth cycle. In fact, after years of witnessing decent growth, commercial real estate transaction volumes have decelerated in the past couple of years. Furthermore, trade tensions, political uncertainty and volatile equity markets are anticipated to add to the woes, affecting transaction levels.

CBRE Group currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of RE/MAX Holdings, Inc. (NYSE:RMAX) , HFF Inc. (NYSE:HF) and Cushman & Wakefield plc (NYSE:CWK) . While RE/MAX Holdings and HFF Inc. are scheduled to report quarterly numbers on Feb 21, Cushman & Wakefield is slated to release earnings on Feb 27.

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