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Here's Why You Should Retain CBRE Group (CBRE) Stock for Now

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CBRE Group, Inc. (CBRE - Free Report) is well-poised to benefit from its wide array of real estate products and service offerings, and healthy outsourcing business. Also, strategic buyouts and solid balance-sheet strength bode well.

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 through 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.

In the second quarter of 2022, it achieved $1 billion of new occupier outsourcing contracts, which is a record high. For the remainder of 2022, management expects the pipeline to remain robust, given the strong outsourcing market.

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 fourth-quarter 2021, it acquired 60% of the ownership interest in Turner & Townsend Holdings Limited, a U.K.-based global leader in program, project and cost management, for $1.27 billion, net of cash received.

CBRE’s in-fill acquisitions aggregated $25.9 million and $42.2 million in cash and deferred consideration in the first and second quarters of 2022, respectively.  

CBRE enjoys a robust balance-sheet position, with ample liquidity and a low leverage level. As of Jun 30, 2022, it had $4.2 billion in total liquidity and a net leverage ratio of 0.20. In August, the company increased its stock repurchase authorization by $2 billion and expanded its revolving credit facility from $3.15 billion to $3.5 billion. Such encouraging moves boost the company’s financial flexibility, aiding growth endeavors.

However, the emergence of new variants of Covid-19, and limited business travel and face-to-face business dealings have made customers put their transactions on hold. This adversely impacts CBRE’s property sales and leasing. Also, the risks associated with market volatility and interest rate hikes are likely to pose operating challenges in the near term.

CBRE Group has an extensive international presence. Therefore, it is subject to unfavorable foreign currency movement, rising geopolitical tension and uneasiness in some economies, which impact its top line. In first-quarter 2022, CBRE group had to exit its Advisory Services business in Russia due to the military conflict between the former and Ukraine. This has exposed its operations in Europe to greater risks.

Analysts seem bearish on this Zacks Rank #3 (Hold) stock. The Zacks Consensus Estimate for the company’s 2022 earnings per share (EPS) has been revised 1.9% downward over the past week to $6.13.

Shares of CBRE have lost 4.1% compared with the industry’s decline of 2.3% in the past three months.

 

Zacks Investment Research
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Stocks to Consider

Some better-ranked stocks from the real estate sector are KE Hodlings (BEKE - Free Report) and Colliers International Group (CIGI - Free Report) .

The Zacks Consensus Estimate for KE Hodlings’ current-year EPS has doubled to 14 cents in the past week. BEKE carries a Zacks Rank #2 (Buy) at present.

The Zacks Consensus Estimate for Colliers International Group’s ongoing year’s EPS has been raised 4% over the past month to $7.50. CIGI currently sports a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.


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