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Can CBRE Group (CBRE) Navigate Well Through Rate Hikes?
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CBRE Group (CBRE - Free Report) offers a wide array of real estate products and services. Although the company benefits from its diversification efforts across asset types, business lines, client types and geographies, the expansion of its resilient business and healthy outsourcing business, persistent macroeconomic uncertainty and its adverse impact on commercial real estate transactions remain a key concern for its transaction-based businesses in the near term.
Moreover, limited credit availability amid high interest rates has led investors to adopt a cautious approach. This has delayed the closing timeline for transactions.
CBRE Group’s Advisory Services segment, mainly property sales and leasing, had been widely affected by the pandemic. Though things have improved from the initial days of the health crisis, the global economic recovery has been uneven, with persistent uncertainty and geopolitical unrest.
With challenging capital market conditions amid high interest rates, many capital sources have tightened their underwriting standards, reducing credit availability. Under these circumstances, investors have either paused or reconsidered their buying decisions, causing a delay in the closing timeline for transactions. Also, a decline in both volumes and the average deal size has hurt the company’s leasing business.
These factors adversely impacted CBRE Group’s transaction-based businesses in the second quarter of 2023, and any significant turnaround is unlikely in the near term. Management expects the delayed recovery in capital markets to hurt its earnings for 2023.
Moreover, shares of this Zacks Rank #4 (Sell) company have increased 0.7% in the past month, underperforming the industry’s growth of 4.9%. Analysts also seem bearish on the stock. The Zacks Consensus Estimate for 2023 EPS has been revised 5.8% downward over the past month, indicating an unfavorable outlook.
Image Source: Zacks Investment Research
However, with a broad range of real estate products and services and an extensive knowledge of domestic and international real estate markets, CBRE Group enjoys a market-leading position. This is likely to give it a competitive edge in navigating through the current challenges and capitalize on compelling opportunities.
CBRE Group has grown organically and banked on strategic in-fill acquisitions to boost its service offerings and geographic reach. Moreover, strategic reinvestment in its business, specifically on the technology front, is expected to differentiate CBRE Group from its peers.
Further, the Global Workplace Solutions (“GWS”) segment, which provides a broad suite of integrated, contractually-based outsourcing services to occupiers of real estate, including facilities management and project management, is well-poised to grow.
The occupiers of real estate have been increasingly opting for outsourcing and depending on the expertise of third-party real estate specialists to achieve an improvement in execution and efficiency. As a result, CBRE has been witnessing continued momentum from both new and existing customers and the expansion of the local business. Further, with significant growth from large first-generation outsourcers, the GWS business pipeline remains elevated, offering CBRE Group scope for growth.
Image: Bigstock
Can CBRE Group (CBRE) Navigate Well Through Rate Hikes?
CBRE Group (CBRE - Free Report) offers a wide array of real estate products and services. Although the company benefits from its diversification efforts across asset types, business lines, client types and geographies, the expansion of its resilient business and healthy outsourcing business, persistent macroeconomic uncertainty and its adverse impact on commercial real estate transactions remain a key concern for its transaction-based businesses in the near term.
Moreover, limited credit availability amid high interest rates has led investors to adopt a cautious approach. This has delayed the closing timeline for transactions.
CBRE Group’s Advisory Services segment, mainly property sales and leasing, had been widely affected by the pandemic. Though things have improved from the initial days of the health crisis, the global economic recovery has been uneven, with persistent uncertainty and geopolitical unrest.
With challenging capital market conditions amid high interest rates, many capital sources have tightened their underwriting standards, reducing credit availability. Under these circumstances, investors have either paused or reconsidered their buying decisions, causing a delay in the closing timeline for transactions. Also, a decline in both volumes and the average deal size has hurt the company’s leasing business.
These factors adversely impacted CBRE Group’s transaction-based businesses in the second quarter of 2023, and any significant turnaround is unlikely in the near term. Management expects the delayed recovery in capital markets to hurt its earnings for 2023.
Moreover, shares of this Zacks Rank #4 (Sell) company have increased 0.7% in the past month, underperforming the industry’s growth of 4.9%. Analysts also seem bearish on the stock. The Zacks Consensus Estimate for 2023 EPS has been revised 5.8% downward over the past month, indicating an unfavorable outlook.
Image Source: Zacks Investment Research
However, with a broad range of real estate products and services and an extensive knowledge of domestic and international real estate markets, CBRE Group enjoys a market-leading position. This is likely to give it a competitive edge in navigating through the current challenges and capitalize on compelling opportunities.
CBRE Group has grown organically and banked on strategic in-fill acquisitions to boost its service offerings and geographic reach. Moreover, strategic reinvestment in its business, specifically on the technology front, is expected to differentiate CBRE Group from its peers.
Further, the Global Workplace Solutions (“GWS”) segment, which provides a broad suite of integrated, contractually-based outsourcing services to occupiers of real estate, including facilities management and project management, is well-poised to grow.
The occupiers of real estate have been increasingly opting for outsourcing and depending on the expertise of third-party real estate specialists to achieve an improvement in execution and efficiency. As a result, CBRE has been witnessing continued momentum from both new and existing customers and the expansion of the local business. Further, with significant growth from large first-generation outsourcers, the GWS business pipeline remains elevated, offering CBRE Group scope for growth.
Stocks to Consider
Some better-ranked stocks from the real estate operation sector are KE Holdings Inc. (BEKE - Free Report) and RE/MAX Holdings, Inc. (RMAX - Free Report) . While KE Holdings sports a Zacks Rank #1 (Strong Buy), RE/MAX Holdings carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for KE Holdings’ current-year EPS has been revised a cent upward to 90 cents over the past month.
The Zacks Consensus Estimate for RE/MAX Holdings’ current-year EPS has remained unchanged over the past week at $1.42.