Analysts' Choice: Beat And Raise At CBRE Group

11/23/2015


  Recent Price
$36
  Dividend
$0.00
  Yield
0.0%
  P/E Ratio
19
  Shares (millions)
337
  Long-Term Debt As % Of Capital
51%
  52-Week Price Range
$39.77 - $30.85

Your editors listen to a lot of quarterly earnings calls, and we love it when a company beats the consensus profit estimate while also raising guidance for future quarters. Late last month, CBRE Group ($36; CBG) announced one of those "beat and raise" quarters.

This provider of commercial real estate services posted per-share profits of $0.51 in the September quarter, up 28% over the year-earlier period and $0.05 better than the consensus. Revenue rose 19% (26% in local currency) to $2.7 billion, surpassing the consensus of $2.6 billion. And the firm upped its full-year earnings-per-share guidance by $0.10 to the $2.00 to $2.05 range, implying 20% growth at the midpoint of this range.

Such top- and bottom-line growth is an outlier right now and should translate into increased investor support for the stock. CBRE, already a Buy and Long-Term Buy, joined the Focus List in the Nov. 16 issue.

Buy the numbers

CBRE is the world's largest commercial real estate services and investment firm, the global leader in commercial leasing, property sales, outsourcing, appraisal, and valuation. The firm manages approximately 5 billion square feet of real estate around the world, including 2.3 billion square feet in the Americas; 1.3 billion in Europe, Middle East and Africa; and 1.4 billion in the Asia-Pacific region.

Top- and bottom-line growth have sprung from broad-based strength across the company's various markets:

• Property-sales revenue rose 11% in the quarter.

• Occupier outsourcing revenue increased 42%, helped by an acquisition.

• Mortgage-services revenue jumped 32%.

• Investment-management and valuation-services revenues rose 9% and 4%, respectively.

• All geographic regions posted healthy revenue growth despite the strong dollar, led by Europe, the Middle East, and Africa — up 28% (42% in local currency). Asia-Pacific posted 12% revenue growth (29% in local currency), while the Americas posted 17% revenue growth (19% in local currency).

Also in the September quarter, CBRE closed its largest acquisition in nearly a decade, the purchase of Johnson Controls' ($46; JCI) Global Workplace Solutions business, the largest facilities manager outside the U.S., with revenue of more than $3 billion in 2014. The deal, which significantly expands CBRE's global footprint, should boost 2016 earnings; last month the company projected high-single-digit gains, up from an earlier target of mid-single-digit growth. The deal should also beef up the company's contractual business, which is largely recurring.

Conclusion

CBRE shares trade at less than 16 times the 2016 consensus earnings estimate of $2.32, 29% below the five-year average. Not dirt cheap, but certainly not expensive given the firm's strong operating momentum. The stock trades at a 9% discount to its 52-week high of nearly $40 per share, a good entry point for new buying.

An annual report for CBRE Group. Inc. is available at 400 S. Hope St., 25th Floor, Los Angeles, CA 90071; (213) 613-3333; www.cbre.com.

CBRE GROUP
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Sep '15
0.51
vs.
0.40
19%
38.76
-
30.85
21 - 17
Jun '15
0.42
vs.
0.36
12%
39.77
-
36.28
23 - 21
Mar '15
0.32
vs.
0.25
10%
38.99
-
31.75
23 - 19
Dec '14
0.68
vs.
0.67
25%
35.37
-
27.49
21 - 16
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
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
95
91
62
95
44
95
58

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


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