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CBRE (CBRE) Down 0.6% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for CBRE Group (CBRE - Free Report) . Shares have lost about 0.6% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is CBRE due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

CBRE Group Q1 Earnings & Revenues Beat Estimates

CBRE Group reported first-quarter 2019 adjusted earnings per share of 79 cents, comfortably beating the Zacks Consensus Estimate of 59. The figure also compares favorably with the prior-year quarter’s reported tally of 54 cents. Results indicate strong revenue growth, driven by leasing and occupier outsourcing.

On a GAAP basis, first-quarter earnings per share came in at 48 cents, indicating an increase of 9.1% year over year from 44 cents.

The company posted revenues of around $5.14 billion, which beat the Zacks Consensus Estimate of $5.10 billion. It also compares favorably with the year-ago quarter’s reported tally of $4.67 billion. Moreover, fee revenues were up 7% (10% in local currency) year over year to $2.4 billion, while organic fee revenues climbed 5% (8% local currency).

EBITDA was up 19% (20% local currency) to $426.9 million, while adjusted EBITDA jumped 29% (31% local currency) to $450 million.

Quarter in Detail

Backed by solid growth in France, Greater China, Japan and the United States, the company’s Advisory Services segment generated year-over-year revenue growth of 8% (11% local currency).

Advisory leasing revenues increased 20% (22% local currency) year over year. There was solid demand from multiple sectors, including consumer products, energy and technology in the U.S. market, while France, Germany, India, Japan and the Netherlands drove stellar growth in International markets.

Solid growth in Australia, Greater China, India, Spain, the U.K. and the United States also led to a 7% (11% local currency) year-over-year increase of Property and advisory project management revenues in the first quarter.

However, capital markets revenues, which comprise both property sales and commercial mortgage origination, slipped 3% (1% local currency) globally. A lackadaisical macro environment for market-wide property sales volume in all three global regions affected the company’s advisory property sales revenues.

Nevertheless, backed by its ability to capitalize on the growing market for real estate outsourcing and account-based client service, Global Workplace Solutions segment reported an increase of 12% (16% local currency) in revenues.

The Real Estate Investments segment (Development, Investment Management and Flexible-Space Solutions) experienced an 8% (5% local currency) decline in revenues. Nonetheless, adjusted revenues that include both equity earnings and gains from real estate sales, net of controlling interests, climbed 21% (23% local currency).

In-process development portfolio increased to $9.7 billion, up $0.7 billion from year-end 2018, as a result of the continued conversion of pipeline activity. Investment management assets under management (AUM) aggregated $107.2 billion, denoting an increase of $1.7 billion ($2.0 billion local currency) from year-end 2018.

Liquidity

CBRE Group exited first-quarter 2019 with cash and cash equivalents of around $604.9 million, down from $777.2 million as of Dec 31, 2018.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a flat path over the past two months.

VGM Scores

Currently, CBRE has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

CBRE has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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