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CBRE Group, Inc. (CBG - Analyst Report) reported net income of $63.8 million or 20 cents per share in the third quarter of fiscal 2011, compared with $57.0 million or 18 cents per share in the year-ago period. Excluding non-recurring items, the company reported a net income of $77.7 million or 24 cents per share during the quarter compared with $62.4 million or 20 cents per share in the year-earlier quarter. Recurring earnings were in line with the Zacks Consensus Estimate.
The company reported revenues of $1.5 billion in the third quarter, up 21% from $1.3 billion in the year-earlier quarter. Total revenue for the reported quarter were in line with the Zacks Consensus Estimate.
Third quarter 2011 EBITDA (earnings before interest, tax, depreciation, and amortization) increased 5% to $179.0 million, compared with $169.9 million in the year-ago quarter. The better-than-expected result was primarily driven by improved performance across almost all geographic regions and business lines despite an increased financial market volatility and economic uncertainty, reflecting the inherent strength of the company.
CBRE Group signed 49 long-term real estate outsourcing contracts (including 20 new clients) in the quarter. Global leasing revenue and outsourcing revenue increased 19% each during the quarter. In addition, global property sales growth surged 23% during the quarter, driven by the Americas (up 42%) and partially offset by flat performance in EMEA (Europe, Middle East and Africa) and Asia Pacific.
Geographically, revenue growth in the quarter was led by EMEA (up 28%) driven by strong performance in France, Germany and the U.K. Overall revenue growth in EMEA was bolstered by a 48% rise in outsourcing revenue and a 33% rise in property leasing revenue. Revenue in the Asia Pacific region increased 24%, while that in the Americas increased 17% year-over-year.
The Global Investment Management segment, comprising investment management operations in the U.S., Europe and Asia, reported revenues of $77.4 million during the quarter compared with $49.5 million in the year-earlier quarter, driven by higher asset management fees and higher incentive fees. Assets under management totaled $53.5 billion at the end of the quarter, up 50.0% from the third quarter of 2010.
During the reported quarter, Development Services segment, that includes real estate development and investment activities primarily in the U.S., reported revenues of $18.8 million versus $21.3 million in the year-ago quarter. The year-over-year decrease was primarily due to lower rental revenue resulting from asset sale. The development pipeline of the company totaled $5.1 billion, up $0.2 billion from third quarter 2010.
At quarter end, CBRE Group had cash and cash equivalents of $662.6 million. The company reiterated its earnings expectations for full year 2011 in the range of $0.95 to $1.05 per share, with a steady recovery in commercial real estate market.
We maintain our ‘Neutral’ recommendation for CBRE Group, which currently retains a Zacks #4 Rank that translates into a short-term ‘Sell’ rating. We also have a ‘Neutral’ recommendation and a Zacks #4 Rank for Jones Lang LaSalle Inc (JLL - Analyst Report), one of the competitors of CBRE Group.
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