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Should Investors Retain CBRE Group (CBRE) Stock for Now?
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CBRE Group, Inc.’s (CBRE - Free Report) wide array of real estate products and service offerings, and healthy outsourcing business positions it well for growth.
CBRE, the largest commercial real estate services and investment firm (based on 2021 revenues), holds extensive knowledge of domestic and international real estate markets. This helps it to enjoy a robust scale. Its market-leading position gives it a competitive edge to navigate challenging situations and capitalize on compelling opportunities.
Over the past few years, CBRE has opted for a better-balanced and more resilient business model. Consequently, its revenue base is contractual and more diversified, which enables it to tide over market disruptions and other economic uncertainties.
With occupiers of real estate increasingly opting for outsourcing and relying on the expertise of third-party real estate specialists to optimize their operations, CBRE Group’s Global Workplace Solutions segment is well-placed to benefit.
To enhance its global reach and expand and reinforce its service offerings, CBRE Group has been focusing on strategic in-fill acquisitions by acquiring regional or specialty firms. In the nine months ended Sep 30, 2022, CBRE Group completed nine in-fill acquisitions.
Further, in November 2022, it acquired Full Spectrum Group, a leading provider of expert technical support services for high-end laboratory systems in the United States, from private equity firm — Pfingsten Partners — for $110 million. The move was in sync with its strategy to deliver reliable, sustainable, operationally excellent and cost-efficient technical service offerings.
On the balance sheet front, CBRE had $4.5 billion in total liquidity as of Sep 30, 2022. The company’s net leverage ratio was 0.21 as of the same date, significantly less than its primary debt covenant of 4.25. With enough financial flexibility, CBRE is well-positioned to capitalize on growth opportunities.
However, rising interest rates have led clients to adopt a cautious approach, with many capital sources tightening their underwriting standards. Also, investors’ desire for greater price discovery is causing a delay in the closing timeline for transactions. These factors are expected to adversely impact CBRE Group’s transaction-based businesses in the near term.
CBRE Group's extensive international presence makes it susceptible to unfavorable foreign currency movement, rising geopolitical tension and uneasiness in some economies. This adversely impacts the company’s top line.
Although shares of this Zacks Rank #3 (Hold) company have gained 22.2% in the past three months, outperforming the industry’s growth of 4.6%, analysts seem bearish on the stock. The Zacks Consensus Estimate for 2022 and 2023 earnings per share (EPS) has been unchanged over the past month, indicating an unfavorable outlook.
The Zacks Consensus Estimate for VICI Properties’ current-year FFO per share is pegged at $1.92.
The Zacks Consensus Estimate for Alexandria Real Estate’s ongoing year’s FFO per share stands at $8.41.
The Zacks Consensus Estimate for Stag Industrial’s 2022 FFO per share is pegged at $2.21.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Should Investors Retain CBRE Group (CBRE) Stock for Now?
CBRE Group, Inc.’s (CBRE - Free Report) wide array of real estate products and service offerings, and healthy outsourcing business positions it well for growth.
CBRE, the largest commercial real estate services and investment firm (based on 2021 revenues), holds extensive knowledge of domestic and international real estate markets. This helps it to enjoy a robust scale. Its market-leading position gives it a competitive edge to navigate challenging situations and capitalize on compelling opportunities.
Over the past few years, CBRE has opted for a better-balanced and more resilient business model. Consequently, its revenue base is contractual and more diversified, which enables it to tide over market disruptions and other economic uncertainties.
With occupiers of real estate increasingly opting for outsourcing and relying on the expertise of third-party real estate specialists to optimize their operations, CBRE Group’s Global Workplace Solutions segment is well-placed to benefit.
To enhance its global reach and expand and reinforce its service offerings, CBRE Group has been focusing on strategic in-fill acquisitions by acquiring regional or specialty firms. In the nine months ended Sep 30, 2022, CBRE Group completed nine in-fill acquisitions.
Further, in November 2022, it acquired Full Spectrum Group, a leading provider of expert technical support services for high-end laboratory systems in the United States, from private equity firm — Pfingsten Partners — for $110 million. The move was in sync with its strategy to deliver reliable, sustainable, operationally excellent and cost-efficient technical service offerings.
On the balance sheet front, CBRE had $4.5 billion in total liquidity as of Sep 30, 2022. The company’s net leverage ratio was 0.21 as of the same date, significantly less than its primary debt covenant of 4.25. With enough financial flexibility, CBRE is well-positioned to capitalize on growth opportunities.
However, rising interest rates have led clients to adopt a cautious approach, with many capital sources tightening their underwriting standards. Also, investors’ desire for greater price discovery is causing a delay in the closing timeline for transactions. These factors are expected to adversely impact CBRE Group’s transaction-based businesses in the near term.
CBRE Group's extensive international presence makes it susceptible to unfavorable foreign currency movement, rising geopolitical tension and uneasiness in some economies. This adversely impacts the company’s top line.
Although shares of this Zacks Rank #3 (Hold) company have gained 22.2% in the past three months, outperforming the industry’s growth of 4.6%, analysts seem bearish on the stock. The Zacks Consensus Estimate for 2022 and 2023 earnings per share (EPS) has been unchanged over the past month, indicating an unfavorable outlook.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are VICI Properties (VICI - Free Report) , Alexandria Real Estate Equities (ARE - Free Report) and Stag Industrial (STAG - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for VICI Properties’ current-year FFO per share is pegged at $1.92.
The Zacks Consensus Estimate for Alexandria Real Estate’s ongoing year’s FFO per share stands at $8.41.
The Zacks Consensus Estimate for Stag Industrial’s 2022 FFO per share is pegged at $2.21.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.