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What's in the Offing for CBRE Group's (CBRE) Q1 Earnings?

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CBRE Group, Inc. (CBRE - Free Report) is slated to report first-quarter 2020 earnings on May 7, before the bell. Results are anticipated to display year-over-year growth in revenues and a decline in earnings.

In the last reported quarter, this Los Angeles, CA-based commercial real estate services and investment firm reported a 1.49% negative earnings surprise. Though results reflected strong property sales and occupier outsourcing growth, decline in leasing activity and lower contributions from Real Estate Investments segment acted as dampeners.

Over the preceding four quarters, the company surpassed estimates on three occasions and missed in the other, the average beat being 9.39%. The graph below depicts this surprise history:

CBRE Group, Inc. Price and EPS Surprise

CBRE Group, Inc. Price and EPS Surprise

CBRE Group, Inc. price-eps-surprise | CBRE Group, Inc. Quote

Let’s see how things have shaped up prior to this announcement.

Factors at Play

CBRE Group is likely to have continued its focus for a better-balanced and more resilient business model in the first quarter, shifting the company’s business mix toward a more contractual one.

Moreover, the company’s Global Workplace Solutions segment, which provides a broad suite of integrated, contractually-based services to occupiers of real estate, including facilities management, project management, transaction management and management consulting, is likely to have benefited. This is owing to real estate occupiers’ increasing preference for outsourcing and dependence on the expertise of third-party real estate specialists for improvement in execution and efficiency.

In addition, the firm has grown organically and banked on strategic in-fill acquisitions to boost its service offerings and geographic reach over the years. Strategic reinvestment in the company’s business, specifically on the technology front, has also differentiated CBRE Group from its peers. With an expanded capability to service, its number of large clients is likely to have been high in the March-end quarter.

However, the coronavirus pandemic has resulted in the recent macroeconomic uncertainty. Capital markets and leasing activity are likely to be affected in the near term and investment volumes are expected to have remained soft, given investors’ cautious stance. Additionally, as the company has a worldwide presence, its businesses are likely to have been more affected in regions where the pandemic duration has been the longest.

The Zacks Consensus Estimate for revenues is currently pegged at $5.49 billion, suggesting an increase of 6.9% year on year.

The Zacks Consensus Estimate for fee revenues from Advisory Services is currently pinned at $1,527 million, down from the prior quarter’s $2,548 million. The estimate for Global Workplace Solutions’ fee revenues is $777 million, suggesting a decrease from the prior quarter’s $877 million. However, fee revenues from Real Estate Investments are estimated at $254 million in the to-be-reported quarter, indicating a sequential increase from the fourth quarter’s $247 million.

CBRE Group’s activities during the January-March period were inadequate to win analysts’ confidence. The Zacks Consensus Estimate for quarterly earnings moved 4.1% south to 70 cents over the past month. The figure also suggests a decline of 11.4% year on year.

Here is what our quantitative model predicts:

Our proven model does not conclusively predict a positive earnings surprise for CBRE Group this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

CBRE Group currently carries a Zacks Rank #4 (Sell) and has an Earnings ESP of -2.64%.

Stocks That Warrant a Look

Here are a few stocks in the broader real estate sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:

Life Storage, Inc. (LSI - Free Report) , slated to release first-quarter earnings on May 7, has an Earnings ESP of +0.36% and carries a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Americold Realty Trust (COLD - Free Report) , scheduled to announce earnings results on May 7, has an Earnings ESP of +9.74% and currently holds a Zacks Rank #3.

VEREIT, Inc. (VER - Free Report) , set to report quarterly numbers on May 20, has an Earnings ESP of +5.15% and carries a Zacks Rank of 3 currently.

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