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Why Is CBRE (CBRE) Down 4.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for CBRE Group (CBRE - Free Report) . Shares have lost about 4.1% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.

CBRE Group Q2 Earnings & Revenues Top Estimates, View Up

CBRE Group reported second-quarter 2019 adjusted earnings per share of 81 cents, comfortably beating the Zacks Consensus Estimate of 78 cents. The figure also compares favorably with the prior-year quarter’s 74 cents.

Results indicate strong revenue growth, driven by leasing, occupier outsourcing and U.S. capital markets.

The company generated revenues of around $5.7 billion, which outpaced the Zacks Consensus Estimate of $5.5 billion. It also compares favorably with the year-ago quarter’s reported tally of $5.1 billion. Moreover, fee revenues were up 12% (15% in local currency) year over year to $2.8 billion. Adjusted EBITDA was up 7% (8% local currency) to $468 million.

Quarter in Detail

The company’s Advisory Services segment registered year-over-year revenue growth of 11% (14% local currency) to nearly $2.18 billion. This was driven by the Americas, where all business lines generated double-digit revenue growths, excluding advisory property sales which increased 8% (9% local currency).

Advisory leasing revenues jumped 19% (21% local currency) year over year. It was up 26% (27% local currency) in the Americas, but down 1% (up 5% local currency) outside the Americas.

Capital market revenues, which comprise both advisory property sales and commercial mortgage origination, were up 5% (7% local currency) globally. This uptick was aided by solid market share gains.

Property and advisory project management revenues and fee revenues climbed 11% (14% local currency) and 7% (10% local currency), respectively.

Furthermore, Global Workplace Solutions segment reported an increase of 12% (15% local currency) in revenues to around $3.4 billion, backed by the company’s ability to bank on the rising occupier demand for outsourced global real estate solutions through its integrated service offering that is more and more enhanced by technology.

The Real Estate Investments segment recorded 28% (32% local currency) growth in revenues. However, adjusted EBITDA plunged 56% (55% local currency) mainly due to the timing of large asset sales in the development business, which was particularly strong in second-quarter 2018.

In-process development portfolio increased to $10.6 billion, up $0.9 billion from first-quarter 2019. There was a $0.3-billion decline in the pipeline during the second quarter to $2.5 billion. This indicates the conversion of prospective projects to in-process activity.

Liquidity

CBRE Group exited second-quarter 2019 with cash and cash equivalents of around $535.6 million, significantly down from $777.2 million as of Dec 31, 2018.

Outlook

Backed by its strong position and solid performance in the first half of the year, CBRE raised its 2019 earnings guidance. The company now expects adjusted earnings per share for the ongoing year in the band of $3.70-$3.80. At the mid-point, this indicates an increase of 14% from the 2018 adjusted earnings per share.

How Have Estimates Been Moving Since Then?

Estimates revision followed an upward path over the past two months.

VGM Scores

At this time, CBRE has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. 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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