At CBRE, Real Estate Drives Real Growth

5/25/2015


  Recent Price
$39
  Dividend
$0.00
  Yield
0.0%
  P/E Ratio
22
  Shares (millions)
336
  Long-Term Debt as % of Capital
43%
  52-Week Price Range
$39.77 - $27.49

CBRE Group ($39; CBRE) is bigger than you think.

At the end of December, the company managed 3.7 billion square feet of property, which equates to 133 square miles. That's a footprint about nine times the size of the New York City office market, and no company is better positioned to benefit from the global recovery in real estate.

In the 12 months ended March, CBRE grew per-share profits 15% on 22% sales growth. Operating cash flow jumped 35%. Analyst estimates are on the rise; they project growth of 12% in revenue and 18% in per-share profits this year, followed by 10% and 16% respectively in 2016.

The company's Global Investor Intentions Survey suggests 2015 will be eventful, with 53% of global real estate investors planning to increase their purchases this year. At the end of March, CBRE had $5.5 billion in deals pending (the most since 2008) and $3.6 billion more in the pipeline.

CBRE trades at 22 times trailing earnings, 7% below its own five-year average. The stock is a Buy and a Long-Term Buy.

Business breakdown

CBRE, which calls itself the world's largest real estate-services firm, operates in about 60 countries but generates more than half of its sales and profits in the U.S. and Canada. Last year, CBRE sold nearly 20,000 properties for a total of $177 billion, while its 60,000 leasing transactions totaled $108 billion in value.

The company manages its own real estate portfolio and provides services ranging from property management to financing to asset valuation. CBRE does business in five segments:

• The Americas (58% of 2014 revenue, 64% of EBITDA) region has delivered three straight quarters of at least 20% revenue growth.

• Revenue in Europe, Middle East, and Africa (26%, 14%) fell in the March quarter, in part because of weakness in the euro and British pound. This region encompasses 41 countries.

• CBRE's Asia Pacific (11%, 8%) segment, operating in 13 countries, grew revenue 7% in the March quarter, or 15% at constant currency.

• Global Investment Management (5%, 8%) managed $87.1 billion at the end of March, up $5 billion from a year earlier excluding the effects of the strong U.S. dollar.

• The development (1%, 6%) unit operates mostly in the U.S.

Merger action

CBRE has long relied on fill-in acquisitions (11 last year and two so far this year) to round out its service offerings and boost growth. The company has announced two deals this year, including a $1.48 billion acquisition of a business that boosts energy efficiency in buildings.

There is a potential chip in CBRE's paint, as smaller rival DTZ has agreed to pay $2 billion for Cushman & Wakefield. The deal will create a giant with $5.5 billion in revenue (versus CBRE's $9.2 billion) and more than 4 billion square feet under management. However, the latest round of industry consolidation sprang from a revival of global demand for commercial property, and CBRE's growth potential remains impressive.

You can obtain an annual report for CBRE Group Inc. at 400 S. Hope St., Los Angeles, CA 90071, (213) 613-3333, ir.cbre.com.

CBRE GROUP
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Mar '15
0.32
vs.
0.25
10%
35.37
-
31.75
21 - 19
Dec '14
0.68
vs.
0.67
25%
33.99
-
27.49
20 - 16
Sep '14
0.40
vs.
0.30
31%
33.77
-
29.78
21 - 19
Jun '14
0.36
vs.
0.31
22%
29.87
-
25.83
20 - 17
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Est.
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2014
9.05
1.68
0.00
35.37
-
25.47
21 - 15
2013
7.18
1.43
0.00
26.58
-
19.78
19 - 14
2012
6.51
1.22
0.00
21.16
-
14.97
17 - 12
2011
5.91
1.03
0.00
29.88
-
12.30
29 - 12
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
88
72
53
94
49
83
81

   * Earnings exclude special items.
   † Quadrix scores are percentile ranks, with 100 the best.


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