Shares of CBRE Group, Inc. have been displaying a decent performance, of late. The stock has risen 7.6% in the past month compared with the 2.2% loss incurred by its industry.
In fact, the rally is expected to continue in the near term as well, as there are a number of favorable factors.
CBRE’s top line has been exhibiting strength for the past several years. In fact, from 2006 through the trailing 12-month second-quarter 2017, the company’s revenues witnessed growth of 4.7 times. Solid growth continued in the third quarter as well, with total revenues and fee revenues increasing 11% and 10%, respectively. Moreover, the company is focused on a better-balanced and more resilient business model.
Additionally, with current-year projected sales growth rate of 6.9% compared with a break-even level for the industry, we anticipate robust bottom-line performance as sales growth is usually an indicator of a company's future earnings performance.
In addition to the above, CBRE has banked on strategic in-fill acquisitions to widen its geographic coverage, as well as expand and reinforce service offerings. The company focuses on acquiring regional or specialty firms which complement its existing platform, as well as independent affiliates in which, at times, it holds small stakes. Furthermore, the company opts for larger, transformational deals driven by macro policies.
Recently, CBRE Group announced the acquisition of a 50% stake in a privately-held strategy and design company — Streetsense. The joint venture (JV) will offer services to retailers and other clients on creating captivating consumer experiences. Also, the company completed the prior-announced acquisition of Heery International, Inc. The move comes as part of the company’s effort to expand its project-management expertise and capabilities.
In fact, it has completed more than 110 acquisitions since 2003, including five large, strategic acquisitions. Specifically, CBRE closed nine acquisitions through October 2017 and maintains an active pipeline. As market conditions continue to improve, we believe these opportunistic acquisitions and strategic investments will likely serve as growth drivers, supplementing its organic growth.
CBRE also enjoyed historical cash flow growth (3-5 years) of 20.6%, which comfortably exceeded 10.8% growth registered by the industry. Also, its current cash flow growth of 13.9% compares favorably with the 0.5% decline projected for the industry.
Encouragingly, CBRE witnessed 17.9% growth in EPS over the last three to five years against the industry’s 3.1% ascend. Further, earlier this month, it delivered a better-than-expected performance for the third quarter, recording a positive earnings surprise of 18.5%. Results indicate strength in all three of its regional services businesses and solid growth in occupier outsourcing business. The company also raised its adjusted earnings per share outlook for full-year 2017.
In fact, the company has been a steady performer, having beaten the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 22.3%. Its projected EPS growth rate for the current year is around 15.9%, which is way better than 4.4% decline estimated for the industry.
CBRE’s Return on Equity (ROE) ratio is 26.2% compared with the industry’s average of 3.9%. This highlights that the company reinvests more efficiently compared to the industry.
Further, this Zacks Rank #2 (Buy) stock has witnessed solid positive earnings estimate revisions. In fact, the Zacks Consensus Estimate for the current-year earnings has been revised 3.9% upward in a month’s time. Also, the estimate for 2018 climbed 3.8% to $2.76 during the same time frame. This reflects analysts’ bullish sentiments on the stock. Given its progress on fundamentals, the stock is likely to keep performing well in the quarters ahead.
Other Stocks to Consider
Investors interested in the real estate industry can also consider other stocks like FirstService Corporation (FSV - Free Report) , Jones Lang LaSalle Incorporated (JLL - Free Report) — popularly known as JLL, and HFF, Inc. (HF - Free Report) . While FirstService Corporation and JLL sport a Zacks Rank of 1 (Strong Buy), HFF carries a Zacks Rank of 2.You can see the complete list of today’s Zacks #1 Rank stocks here.
The 2017 Zacks Consensus Estimate for FirstService Corporation is pegged at $1.99 — indicating an increase of 1% in a month’s time.
The Zacks Consensus Estimate for current-year earnings of JLL moved up 2.7% to $8.23 over the past month.
The Zacks Consensus Estimate for full-year 2017 earnings of HFF moved up 3.5% to $2.36 in a month’s time.
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