Back to top

Image: Bigstock

4 Real Estate Operation Stocks to Play the Reopening Game

Read MoreHide Full Article

After a dismal 2020, the global economy witnessed modest growth in the first quarter this year, though it was concentrated in a small number of large economies. The acceleration of vaccination programs as well as government stimulus programs across the globe have, however, set the stage for recovery, with anticipations of robust growth in the rest of 2021 as pent-up demand starts to resurface. This is leading to a significant recovery in investor sentiment.

Moreover, key global central banks are expected to continue keeping short-term policy rates at low levels, thereby supporting the real estate industry. And as the economy continues to recover, the overall demand for the real estate is also getting a boost.

According to a report from JLL, investment sales continued to show signs of recovery this January-March quarter, with global volumes declining 13% compared with the prior-year quarter, after a 21% slip in fourth-quarter 2020 and 44% drop in third-quarter 2020, reflecting liquidity and capital flows’ steady improvement.

Speaking about the dynamics within the industry, it is interesting to note that despite the adverse impact on the higher-margin property leasing and sales businesses, the pandemic is accelerating a number of trends that were present prior to its onset, as well as compelling businesses to transform.

Specifically, global industrial leasing activity, backed by e-retailing has been hogging the limelight, proving this asset type’s resiliency amid the coronavirus mayhem. Moreover, a number of workplace trends that were present before the pandemic, such as experiential workspaces, outsourced real estate functions, together with greater-than-before focus on employee well-being have also gained significant prominence, in turn opening up scopes for these industry participants to bank upon. As such, players with broad diversification across property types, geography, business lines and clients have opportunities to flourish.

One important thing to take note is that the occupiers of real estate, such as corporations, public sector entities, health-care providers and others, have been increasingly opting for the outsourcing of real estate needs, thereby depending on the expertise of third-party real estate specialists for execution and efficiency improvement. In particular, big players are capitalizing on this trend, with both existing as well as new client wins and expansions, which includes advising on re-entry strategies and code of behavior.

Besides, the pandemic has aggravated the technological disruption in the commercial real estate industry, and the big players in this industry are emphasising on process improvements and leveraging their technology platform. These efforts offer significant scope for growth, drive efficiency, deliver differentiated client services, help in market-share gains, and aid in differentiating from peers. Thus, investments in technology will likely keep being the key focus for this industry’s constituent companies.

As such, amid this acceleration of certain trends, outsourcing real estate needs, vaccine roll out and reopening of the economy, the time is now apt to enhance one’s portfolio with some real estate operation stocks that have solid fundamentals and are witnessing decent upward estimate revisions, suggesting analysts’ bullish expectations.

Here are 4 Stocks to Pick:

CBRE Group, Inc. (CBRE - Free Report) : Headquartered in Dallas, TX, CBRE Group is a commercial real estate services and investment firm. The company continues to benefit from the diversification of business across property types, lines of business, geographic markets and client types along with technology investments, cost-management moves and strong balance-sheet position.

CBRE Group carries a Zacks Rank #2 (Buy), at present. The Zacks Consensus Estimate for current-year earnings per share moved 3.5% upward over the past two months to $3.83. Additionally, the company’s long-term earnings growth rate is projected at 11%, which is ahead of the industry average.

Jones Lang LaSalle Incorporated (JLL - Free Report) : Headquartered in Chicago, IL, Jones Lang LaSalle offers commercial real estate and investment management services. The company’s diverse range of products and service offerings, along with its strategic investments, give it a strong footing. Also, its superior client services and strategic investment in technology and innovation are expected to help grow market share and win relationships.

The Zacks Consensus Estimate for 2021 earnings per share moved 16.2% north in the past month to $12.25. Additionally, the company’s long-term earnings growth rate is estimated at 9%. Jones Lang LaSalle currently holds a Zacks Rank #2.

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

FirstService Corporation (FSV - Free Report) : Headquartered in Toronto, Canada, FirstService Corporation offers property services to commercial, institutional and residential customers, primarily in North America and internationally. The company, a leader in essential outsourced property services in the United States and Canada, is poised to benefit from increased activity levels.

FirstService carries a Zacks Rank of 2, at present. The Zacks Consensus Estimate for ongoing-year earnings per share has been revised 3.8% upward in two months’ time, reflecting positive sentiments. The figure suggests an increase of 11.3%, year on year.

Realogy Holdings Corp. (RLGY - Free Report) : This Madison, NJ-headquartered company is one of America's reputed real estate services companies. It offers brokerage services, relocation and title and settlement businesses as well as a mortgage joint venture. Realogy’s brands include Better Homes and Gardens Real Estate, Century 21, Coldwell Banker, Coldwell Banker Commercial, Corcoran, ERA and Sotheby's International Realty. The company is poised to benefit from the rebounding fundamentals of the real estate operations industry.

This Zacks Rank #1 company is witnessing solid estimate revisions, with the Zacks Consensus Estimate for the current year moving up 3.7% over the past month to $2.24. It also calls for 11.4% increase, year on year.

Here are the price performances of the above-mentioned stocks in the year so far.

Zacks Investment ResearchImage Source: Zacks Investment Research

Infrastructure Stock Boom to Sweep America

A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.

The only question is “Will you get into the right stocks early when their growth potential is greatest?”

Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.

Download FREE: How to Profit from Trillions on Spending for Infrastructure >>