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Zacks Industry Outlook Highlights FirstService, Colliers International and Kennedy-Wilson
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For Immediate Release
Chicago, IL – October 19, 2023 – Today, Zacks Equity Research discusses FirstService Corp. (FSV - Free Report) , Colliers International Group Inc. (CIGI - Free Report) and Kennedy-Wilson Holdings, Inc. (KW - Free Report) .
The Zacks Real Estate Operations industry faces ongoing challenges, including high interest rates to combat inflation, macroeconomic issues and geopolitical concerns. Stricter lending criteria in debt markets have limited availability and increased borrowing costs, impacting transaction activities. Elevated interest rates lead to cautious client behavior, causing transaction delays as investors seek comprehensive price discoveries.
Despite these challenges, the growing trend of outsourcing real estate needs and pandemic-driven shifts present growth opportunities for industry players. Investments in technology provide a competitive advantage. Companies like FirstService Corp., Colliers International Group Inc. and Kennedy-Wilson Holdings, Inc. stand to benefit from these developments.
About the Industry
The Zacks Real Estate Operations industry comprises companies that provide leasing, property management, investment management, valuation, development services, facility management, project management, transaction and consulting services, among others. However, real estate investment trusts or REITs are excluded from this group. Economic trends and government policies impact the real estate market (global and regional), which determines the industry’s performance.
Economic activity, employment growth, office-based employment, interest-rate levels, costs and availability of credit, tax and regulatory policies and the geopolitical environment are the major factors shaping the real estate market’s fate. Moreover, pandemic-induced public health challenges and geopolitical issues have impacted property sales and the leasing lines of businesses.
What's Shaping the Real Estate Operations Industry's Future?
Elevated Interest Rates & Macroeconomic Factors Impacting the Industry: The industry is expected to encounter ongoing challenges due to several factors, which include increased interest rates implemented to control inflation, global economic uncertainty and a volatile geopolitical environment. Globally, central banks are raising interest rates to combat inflation, leading to reduced access to credit. This scenario, where borrowing becomes scarcer and more expensive, is exerting an influence on transaction activities.
The debt markets are adopting a more careful approach by implementing stricter lending criteria. High interest rates are causing clients to exercise caution. As a result, investors are now seeking more extensive price discovery, resulting in longer transaction completion times. These factors are significantly contributing to a decline in sales and leasing, ultimately impacting the industry's short-term revenue prospects.
Pandemic-Led Structural Changes Continue: The pandemic has resulted in significant shifts in the utilization of various categories of commercial real estate. Companies have been steadily rolling out initiatives to encourage their employees to come back to the office, but the pace of this transition has been slow.
As a result, tenants' confidence in making long-term commitments for office space has not yet reached pre-pandemic levels. Additionally, the pace of business-related travel and in-person interactions has not fully rebounded to pre-pandemic norms. It is anticipated that operational challenges will persist in the foreseeable future, with clients remaining cautious and potentially causing delays in real estate decision-making in the short term.
Outsourcing of Real Estate Needs to Gather Steam: Real estate occupiers, including corporations, public sector entities, healthcare providers and those in finance, industrial sectors, life sciences and technology, are increasingly opting to outsource their real estate needs. They are placing their confidence in third-party real estate experts to achieve improved execution and efficiency.
Organizations are progressively seeking strategic guidance to reimagine their workspaces and practices to enhance their culture, attract talent and boost performance. These trends are creating opportunities for participants in the real estate services sector. Key players in the industry are taking advantage of this shift, leading to the acquisition of new clients and the expansion of existing ones. Within this industry, companies will continue to prioritize investments in technology as it consistently enhances efficiency, provides superior client services and contributes to market share expansion.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Real Estate Operations industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #235, which places it in the bottom 6% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of the downward earnings per share outlook for the constituent companies in aggregate. Looking at the aggregate earnings per share estimate revisions, it appears that, of late, analysts are losing confidence in this group’s growth potential. Over the past year, the industry’s earnings per share estimates for 2023 and 2024 have moved 32.6% and 37.5% south, respectively.
However, before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Underperforms the Sector & the S&P 500
The Zacks Real Estate Operations industry has underperformed the broader Zacks Finance sector and the S&P 500 composite over the past year.
The industry has increased 2.5% during this period against the S&P 500’s growth of 18.8% and the broader Finance sector’s rise of 10%.
Industry's Current Valuation
On the basis of the forward 12-month price-to-EPS, which is a commonly used multiple for valuing Real Estate Operations stocks, we see that the industry is currently trading at 16.20X compared with the S&P 500’s forward 12-month price-to-earnings (P/E) of 18.66X. The industry is trading above the Finance sector’s forward 12-month P/E of 12.91X.
Over the last five years, the industry has traded as high as 32.14X and as low as 11.38X, with a median of 16.25X.
3 Real Estate Operation Stocks Trying to Survive Industry Woes
Colliers International Group: Headquartered in Toronto, Canada, Colliers International Group provides commercial real estate professional services and investment management to corporate and institutional clients. The company operates across the Americas, Europe, the Middle East and Africa and the Asia Pacific. Its primary services are outsourcing and advisory services, investment management, leasing and capital markets.
CIGI is poised to ride the growth curve, backed by its globally balanced and highly diversified business model. Its recurring revenues and efficiency in capitalizing on opportunities augur well.
Colliers International currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2023 earnings per share has moved marginally north over the past month, reflecting positive sentiments. The company’s shares have declined 1.1% year to date. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
FirstService Corp.: gHeadquartered in Toronto, Canada, FirstService 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 North America, serves its customers through two service platforms — FirstService Residential and FirstService Brands. It is poised to benefit from the strong demand for its services.
FirstService carries a Zacks Rank #3 (Hold) at present. The Zacks Consensus Estimate for the current-year earnings per share is pegged at $4.90, which suggests a 15.57% increase year over year. The company’s shares have rallied 17% year to date.
Kennedy Wilson: Headquartered in Beverly Hills, CA, Kennedy Wilson is a global real estate investment company. KW is engaged in the ownership, operation and investment in real estate on its own and through its investment management platform. Kennedy Wilson focuses on multifamily and office properties located in the Western United States, the United Kingdom and Ireland.
The company is expected to benefit from the continued expansion of its investment management business and healthy demand for its high-quality multifamily portfolio.
Kennedy Wilson currently has a Zacks Rank #3. The Zacks Consensus Estimate for 2023 earnings per share has moved 16.8% upward over the past three months to $1.53. The stock has declined 11.1% year to date.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights FirstService, Colliers International and Kennedy-Wilson
For Immediate Release
Chicago, IL – October 19, 2023 – Today, Zacks Equity Research discusses FirstService Corp. (FSV - Free Report) , Colliers International Group Inc. (CIGI - Free Report) and Kennedy-Wilson Holdings, Inc. (KW - Free Report) .
Industry: Real Estate Operations
Link: https://www.zacks.com/commentary/2168111/3-real-estate-operations-stocks-to-consider-despite-industry-woes
The Zacks Real Estate Operations industry faces ongoing challenges, including high interest rates to combat inflation, macroeconomic issues and geopolitical concerns. Stricter lending criteria in debt markets have limited availability and increased borrowing costs, impacting transaction activities. Elevated interest rates lead to cautious client behavior, causing transaction delays as investors seek comprehensive price discoveries.
Despite these challenges, the growing trend of outsourcing real estate needs and pandemic-driven shifts present growth opportunities for industry players. Investments in technology provide a competitive advantage. Companies like FirstService Corp., Colliers International Group Inc. and Kennedy-Wilson Holdings, Inc. stand to benefit from these developments.
About the Industry
The Zacks Real Estate Operations industry comprises companies that provide leasing, property management, investment management, valuation, development services, facility management, project management, transaction and consulting services, among others. However, real estate investment trusts or REITs are excluded from this group. Economic trends and government policies impact the real estate market (global and regional), which determines the industry’s performance.
Economic activity, employment growth, office-based employment, interest-rate levels, costs and availability of credit, tax and regulatory policies and the geopolitical environment are the major factors shaping the real estate market’s fate. Moreover, pandemic-induced public health challenges and geopolitical issues have impacted property sales and the leasing lines of businesses.
What's Shaping the Real Estate Operations Industry's Future?
Elevated Interest Rates & Macroeconomic Factors Impacting the Industry: The industry is expected to encounter ongoing challenges due to several factors, which include increased interest rates implemented to control inflation, global economic uncertainty and a volatile geopolitical environment. Globally, central banks are raising interest rates to combat inflation, leading to reduced access to credit. This scenario, where borrowing becomes scarcer and more expensive, is exerting an influence on transaction activities.
The debt markets are adopting a more careful approach by implementing stricter lending criteria. High interest rates are causing clients to exercise caution. As a result, investors are now seeking more extensive price discovery, resulting in longer transaction completion times. These factors are significantly contributing to a decline in sales and leasing, ultimately impacting the industry's short-term revenue prospects.
Pandemic-Led Structural Changes Continue: The pandemic has resulted in significant shifts in the utilization of various categories of commercial real estate. Companies have been steadily rolling out initiatives to encourage their employees to come back to the office, but the pace of this transition has been slow.
As a result, tenants' confidence in making long-term commitments for office space has not yet reached pre-pandemic levels. Additionally, the pace of business-related travel and in-person interactions has not fully rebounded to pre-pandemic norms. It is anticipated that operational challenges will persist in the foreseeable future, with clients remaining cautious and potentially causing delays in real estate decision-making in the short term.
Outsourcing of Real Estate Needs to Gather Steam: Real estate occupiers, including corporations, public sector entities, healthcare providers and those in finance, industrial sectors, life sciences and technology, are increasingly opting to outsource their real estate needs. They are placing their confidence in third-party real estate experts to achieve improved execution and efficiency.
Organizations are progressively seeking strategic guidance to reimagine their workspaces and practices to enhance their culture, attract talent and boost performance. These trends are creating opportunities for participants in the real estate services sector. Key players in the industry are taking advantage of this shift, leading to the acquisition of new clients and the expansion of existing ones. Within this industry, companies will continue to prioritize investments in technology as it consistently enhances efficiency, provides superior client services and contributes to market share expansion.
Zacks Industry Rank Indicates Bleak Prospects
The Zacks Real Estate Operations industry is housed within the broader Zacks Finance sector. It carries a Zacks Industry Rank #235, which places it in the bottom 6% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the bottom 50% of the Zacks-ranked industries is a result of the downward earnings per share outlook for the constituent companies in aggregate. Looking at the aggregate earnings per share estimate revisions, it appears that, of late, analysts are losing confidence in this group’s growth potential. Over the past year, the industry’s earnings per share estimates for 2023 and 2024 have moved 32.6% and 37.5% south, respectively.
However, before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Underperforms the Sector & the S&P 500
The Zacks Real Estate Operations industry has underperformed the broader Zacks Finance sector and the S&P 500 composite over the past year.
The industry has increased 2.5% during this period against the S&P 500’s growth of 18.8% and the broader Finance sector’s rise of 10%.
Industry's Current Valuation
On the basis of the forward 12-month price-to-EPS, which is a commonly used multiple for valuing Real Estate Operations stocks, we see that the industry is currently trading at 16.20X compared with the S&P 500’s forward 12-month price-to-earnings (P/E) of 18.66X. The industry is trading above the Finance sector’s forward 12-month P/E of 12.91X.
Over the last five years, the industry has traded as high as 32.14X and as low as 11.38X, with a median of 16.25X.
3 Real Estate Operation Stocks Trying to Survive Industry Woes
Colliers International Group: Headquartered in Toronto, Canada, Colliers International Group provides commercial real estate professional services and investment management to corporate and institutional clients. The company operates across the Americas, Europe, the Middle East and Africa and the Asia Pacific. Its primary services are outsourcing and advisory services, investment management, leasing and capital markets.
CIGI is poised to ride the growth curve, backed by its globally balanced and highly diversified business model. Its recurring revenues and efficiency in capitalizing on opportunities augur well.
Colliers International currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2023 earnings per share has moved marginally north over the past month, reflecting positive sentiments. The company’s shares have declined 1.1% year to date. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
FirstService Corp.: gHeadquartered in Toronto, Canada, FirstService 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 North America, serves its customers through two service platforms — FirstService Residential and FirstService Brands. It is poised to benefit from the strong demand for its services.
FirstService carries a Zacks Rank #3 (Hold) at present. The Zacks Consensus Estimate for the current-year earnings per share is pegged at $4.90, which suggests a 15.57% increase year over year. The company’s shares have rallied 17% year to date.
Kennedy Wilson: Headquartered in Beverly Hills, CA, Kennedy Wilson is a global real estate investment company. KW is engaged in the ownership, operation and investment in real estate on its own and through its investment management platform. Kennedy Wilson focuses on multifamily and office properties located in the Western United States, the United Kingdom and Ireland.
The company is expected to benefit from the continued expansion of its investment management business and healthy demand for its high-quality multifamily portfolio.
Kennedy Wilson currently has a Zacks Rank #3. The Zacks Consensus Estimate for 2023 earnings per share has moved 16.8% upward over the past three months to $1.53. The stock has declined 11.1% year to date.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.