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CBRE Group (CBRE) Q1 Earnings Beat on Resilient Business
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CBRE Group Inc. (CBRE - Free Report) reported first-quarter 2021 adjusted earnings per share of 86 cents, handily beating the Zacks Consensus Estimate of 70 cents. Moreover, the figure climbed 14.7% from the 75 cents reported in the year-ago period.
The company generated revenues of $5.94 billion, outpacing the Zacks Consensus Estimate of $5.75 billion. The revenue figure also compares favorably with the year-ago quarter’s $5.89 billion. However, net revenues were down 2.1% (4.4% in local currency), year on year, to $3.36 billion.
Nevertheless, adjusted EBITDA climbed 14.1% (11.9% local currency) to $491 million.
Despite the pandemic’s adverse impact on property leasing and sales, quarterly results reflect the benefits from diversifying and expanding its resilient business in recent years.
Bob Sulentic, president & chief executive officer of CBRE noted, “Our performance is being propelled by our long-standing efforts to diversify our business across four key dimensions: property types, lines of business, geographic markets and client types.” Also, he attributed the 2020 “re-set” of the cost structure for this earnings growth.
Moreover, he pointed that “For full-year 2021, we now expect adjusted earnings per share to meaningfully surpass 2019’s peak level, with potential upside from discretionary capital deployment.”
Quarter in Detail
The company’s Advisory Services segment reported a year-over-year revenue decline of 5.3% (7.3% local currency) to $1.7 billion. Net revenues decreased 5.3% (7.3% local currency) to $1.69 billion. Operating profit came in at $332 million compared with the year-ago period’s $333 million.
Though the pandemic’s impact on the company’s business eased to some extent, leasing and sales activities were hampered. However, the company benefited from its cost efforts.
Leasing revenue remained choppy, declining 17% (18% local currency), with overall leasing activity being weak in the United States, while International markets were generally more resilient.
There was a rebound in capital markets activity with global property sales revenue slipping 9% (11% local currency), which marks the mildest drop, by far, since the pandemic-induced downturn started in second-quarter 2020, per the company. Particularly, the U.K., India/Southeast Asia/Middle East/Africa, and Pacific display decent growth. However, the United States witnessed a decline in sales revenues, year on year.
Commercial mortgage revenues increased 14% (13% in local currency) from first-quarter 2020, while revenues from loan servicing climbed 22% (20% in local currency) during the quarter. Valuation revenues were up 8% (3% local currency), while property management’s net revenues climbed 2%, but dipped 1% in local currency.
The Global Workplace Solutions (GWS) segment registered an increase of 3.6% (1.6% in local currency) in revenues to $4.03 billion. Net revenues inched up 1.3% (down 1.0% in local currency) to $1.46 billion. Operating profit increased to $152 million from the year-ago period’s $107 million. Resilient demand for facilities management, particularly for data centers, combined with cost-saving efforts, fueled operating profit growth. Nonetheless, project management net revenues declined 7% (9% in local currency), underlining lackadaisical demand for projects.
Encouragingly, facilities management’s new business pipeline picked up from the end of 2020, with the reopening of economies and demand from several sectors, including life sciences, technology, manufacturing and professional services.
The Real Estate Investments segment recorded a 0.2% (4.0% in local currency) decrease in revenues to $211 million. Yet, operating profit increased to $61 million from the year-ago period’s $43 million, mainly on investment management growth.
Investment management revenues climbed 9% (4% in local currency) to $132.1 million.
At the end of first-quarter 2021, assets under management (AUM) reached a record high for the company and aggregated $124.5 billion, reflecting an increase of $1.8 billion ($3.5 billion local currency) from year-end 2020. This highlights higher asset valuations and net capital inflows, partially offset by adverse foreign-currency movement.
Apart from this, the in-process development portfolio ended first-quarter 2021 at $15 billion, up $0.1 billion from year-end 2020, reflecting a record level for the company. The pipeline increased by $0.7 billion from year-end 2020 to $6.8 billion.
During the March-end quarter, the company acquired an incremental interest in Industrious, bringing its current ownership stake to 35%. Moreover, it acquired a small project management company based in Los Angeles.
Balance Sheet Position
CBRE Group exited first-quarter 2021 with cash and cash equivalents of $1.91 billion, marginally up from $1.9 billion as of Dec 31, 2020.
As of Mar 31, 2021, the company had $4.6 billion of total liquidity. This comprised $1.8 billion in cash, in addition to the ability to borrow a total of $2.8 billion under its revolving credit facilities, net of any outstanding letters of credit. The company’s net leverage ratio was 0.02x as of the same date. This is significantly below CBRE’s primary debt covenant of 4.25x.
During the March-end quarter, the company repurchased $64.1 million of its stock. As of Mar 31, 2021, it had $285.9 million of stock-repurchase capacity.
We, now, look forward to the earnings results of other companies in the real estate sector like Jones Lang LaSalle Incorporated (JLL - Free Report) , Newmark Group, Inc. (NMRK - Free Report) and The RMR Group Inc. (RMR - Free Report) ), which are slated to report next week.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
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CBRE Group (CBRE) Q1 Earnings Beat on Resilient Business
CBRE Group Inc. (CBRE - Free Report) reported first-quarter 2021 adjusted earnings per share of 86 cents, handily beating the Zacks Consensus Estimate of 70 cents. Moreover, the figure climbed 14.7% from the 75 cents reported in the year-ago period.
The company generated revenues of $5.94 billion, outpacing the Zacks Consensus Estimate of $5.75 billion. The revenue figure also compares favorably with the year-ago quarter’s $5.89 billion. However, net revenues were down 2.1% (4.4% in local currency), year on year, to $3.36 billion.
Nevertheless, adjusted EBITDA climbed 14.1% (11.9% local currency) to $491 million.
Despite the pandemic’s adverse impact on property leasing and sales, quarterly results reflect the benefits from diversifying and expanding its resilient business in recent years.
Bob Sulentic, president & chief executive officer of CBRE noted, “Our performance is being propelled by our long-standing efforts to diversify our business across four key dimensions: property types, lines of business, geographic markets and client types.” Also, he attributed the 2020 “re-set” of the cost structure for this earnings growth.
Moreover, he pointed that “For full-year 2021, we now expect adjusted earnings per share to meaningfully surpass 2019’s peak level, with potential upside from discretionary capital deployment.”
Quarter in Detail
The company’s Advisory Services segment reported a year-over-year revenue decline of 5.3% (7.3% local currency) to $1.7 billion. Net revenues decreased 5.3% (7.3% local currency) to $1.69 billion. Operating profit came in at $332 million compared with the year-ago period’s $333 million.
Though the pandemic’s impact on the company’s business eased to some extent, leasing and sales activities were hampered. However, the company benefited from its cost efforts.
Leasing revenue remained choppy, declining 17% (18% local currency), with overall leasing activity being weak in the United States, while International markets were generally more resilient.
There was a rebound in capital markets activity with global property sales revenue slipping 9% (11% local currency), which marks the mildest drop, by far, since the pandemic-induced downturn started in second-quarter 2020, per the company. Particularly, the U.K., India/Southeast Asia/Middle East/Africa, and Pacific display decent growth. However, the United States witnessed a decline in sales revenues, year on year.
Commercial mortgage revenues increased 14% (13% in local currency) from first-quarter 2020, while revenues from loan servicing climbed 22% (20% in local currency) during the quarter. Valuation revenues were up 8% (3% local currency), while property management’s net revenues climbed 2%, but dipped 1% in local currency.
The Global Workplace Solutions (GWS) segment registered an increase of 3.6% (1.6% in local currency) in revenues to $4.03 billion. Net revenues inched up 1.3% (down 1.0% in local currency) to $1.46 billion. Operating profit increased to $152 million from the year-ago period’s $107 million. Resilient demand for facilities management, particularly for data centers, combined with cost-saving efforts, fueled operating profit growth. Nonetheless, project management net revenues declined 7% (9% in local currency), underlining lackadaisical demand for projects.
Encouragingly, facilities management’s new business pipeline picked up from the end of 2020, with the reopening of economies and demand from several sectors, including life sciences, technology, manufacturing and professional services.
The Real Estate Investments segment recorded a 0.2% (4.0% in local currency) decrease in revenues to $211 million. Yet, operating profit increased to $61 million from the year-ago period’s $43 million, mainly on investment management growth.
Investment management revenues climbed 9% (4% in local currency) to $132.1 million.
At the end of first-quarter 2021, assets under management (AUM) reached a record high for the company and aggregated $124.5 billion, reflecting an increase of $1.8 billion ($3.5 billion local currency) from year-end 2020. This highlights higher asset valuations and net capital inflows, partially offset by adverse foreign-currency movement.
Apart from this, the in-process development portfolio ended first-quarter 2021 at $15 billion, up $0.1 billion from year-end 2020, reflecting a record level for the company. The pipeline increased by $0.7 billion from year-end 2020 to $6.8 billion.
During the March-end quarter, the company acquired an incremental interest in Industrious, bringing its current ownership stake to 35%. Moreover, it acquired a small project management company based in Los Angeles.
Balance Sheet Position
CBRE Group exited first-quarter 2021 with cash and cash equivalents of $1.91 billion, marginally up from $1.9 billion as of Dec 31, 2020.
As of Mar 31, 2021, the company had $4.6 billion of total liquidity. This comprised $1.8 billion in cash, in addition to the ability to borrow a total of $2.8 billion under its revolving credit facilities, net of any outstanding letters of credit. The company’s net leverage ratio was 0.02x as of the same date. This is significantly below CBRE’s primary debt covenant of 4.25x.
During the March-end quarter, the company repurchased $64.1 million of its stock. As of Mar 31, 2021, it had $285.9 million of stock-repurchase capacity.
Currently, CBRE Group carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CBRE Group, Inc. Price, Consensus and EPS Surprise
CBRE Group, Inc. price-consensus-eps-surprise-chart | CBRE Group, Inc. Quote
We, now, look forward to the earnings results of other companies in the real estate sector like Jones Lang LaSalle Incorporated (JLL - Free Report) , Newmark Group, Inc. (NMRK - Free Report) and The RMR Group Inc. (RMR - Free Report) ), which are slated to report next week.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>