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Analyst Blog

On Feb 28, 2014, we issued an updated research report on CBRE Group Inc. (CBG - Analyst Report). CBRE’s fourth-quarter 2013 adjusted earnings came in at 67 cents per share, a penny ahead of the Zacks Consensus Estimate and up 22% year over year. Quarterly results were driven by strong contribution from the global investment management and property sales, improved leasing momentum and strength in the occupier outsourcing business.

Yet, commercial mortgage brokerage revenues continued to decline owing to the negative impact of the U.S. Government-Sponsored Enterprises’ (GSEs) initiatives to scale back lending activity. Moreover, unfavorable foreign currency movement affected its Asia Pacific results.

Going forward, we believe that apart from the regulatory limits on GSEs lending, which is anticipated to continue to pressurize revenue and profits for the commercial mortgage brokerage business, the slowdown of economic growth in Asia-Pacific as well as the upheavals in emerging economies would continue to remain a concern for CBRE.

Moreover, the strategic investments in IT and headcounts, which stands good for the long term, would somewhat erode a part of margin improvement in the near term.

Despite an earnings beat (though by a penny), analysts turned more bearish on the stock’s future performance. This is evident from the movement witnessed in the Zacks Consensus Estimate that decreased 6.5% to $1.59 per share for 2014 and 4.2% to $1.82 per share for 2015, over the past 30 days.

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

Stocks That Warrant a Look

Some better-ranked major regional banks include FirstService Corporation (FSRV - Snapshot Report), Jones Lang LaSalle Incorporated (JLL - Analyst Report) and NorthStar Realty Finance Corp. (NRF - Snapshot Report). All three stocks have a Zacks Rank #2 (Buy).

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