CBRE Group's (CBRE) Q3 Earnings Top Estimate, Stock Down

CBRE Group Inc. (NYSE:CBRE) reported third-quarter 2019 adjusted earnings per share of 79 cents, beating the Zacks Consensus Estimate of 78 cents. Notably, the figure remained flat year over year.

Results indicate strong revenue growth, driven by leasing, advisory services and U.S. capital markets.

The company generated revenues of around $5.9 billion, outpacing the Zacks Consensus Estimate of $5.7 billion. The revenue figure also compares favorably with the year-ago quarter’s reported tally of around $5.3 billion. Moreover, fee revenues were up 11% (12.8% in local currency), year over year, to $2.9 billion. Adjusted EBITDA was edged down 1.9% (1% local currency) to $455 million.

However, shares of the company declined 4.4%, in full-day trading session post earnings release, indicating broader market concerns.

Quarter in Detail

The company’s Advisory Services segment registered year-over-year revenue growth of 8.8% (10.2% local currency) to $2.2 billion. This was driven by 8% growth in advisory property sales revenues.

Advisory leasing revenues improved 4% (5% local currency). This upswing resulted from strong leasing in Australia, Brazil, India, Poland and the U.K. Moreover, leasing improved 4% in the United States.

Capital market revenues, which comprise both advisory property sales and commercial mortgage origination, were up 11% (13% local currency). This upswing was aided by solid growth in commercial mortgage origination revenues.

Property and advisory project management revenues and fee revenues climbed 12% (14% local currency) and 6% (8% local currency), respectively.

Furthermore, Global Workplace Solutions segment registered an increase of 15.3% (17.5% local currency) in revenues to $3.5 billion. Strength across facilities management, project management and transactions business stoked growth.

The Real Estate Investments segment recorded 8.8% (11.6% local currency) growth in revenues. However, adjusted EBITDA tanked 83.5% (82.7% local currency), mainly due to the timing of large asset sales in the development business, which was particularly strong in third-quarter 2018, as well as higher investment in the company’s flexible workspace offering.

In-process development portfolio increased to $10.9 billion, up $0.3 billion from second-quarter 2019. There was a $1-billion increase in the pipeline during the third quarter to $3.5 billion. This indicates the fee development and built-to-suit projects.

Liquidity

CBRE Group exited third-quarter 2019 with cash and cash equivalents of around $577.5 million, down from $777.2 million as of Dec 31, 2018.

Outlook

CBRE Group maintained its 2019 earnings guidance. The company projects adjusted earnings per share for the ongoing year in the band of $3.70-$3.80. This indicates an increase of 14% from the 2018 adjusted earnings per share at the mid-point.

Conclusion

CBRE Group put up a stellar show in the September-end quarter. Robust growth in the company’s real estate services business segments — Advisory Services and Global Workplace Solutions — is also encouraging. Further, the company displayed strength in its commercial mortgage origination, global occupier outsourcing and U.S. property sales business lines during this period.

CBRE Group, Inc. Price, Consensus and EPS Surprise

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Written By: Zacks Investment Research