Company Reports

Narrow-moat-rated CBRE’s first-quarter results were largely in line with our expectations. The advisory services segment remained stable while the outsourcing segment continued its growth trajectory. We believe that the brokerage business should perform relatively well in the second half of 2024, but it is not out of the woods yet, given our macroeconomic and rates outlook. A soft landing is now a widespread market consensus, but we think investors in commercial real estate service firms shouldn’t rule out the possibility of a relatively harder landing.

CBRE Group has overseen a boom in the commercial real estate services industry since the nadir of the real estate-driven financial crisis of 2007. As the largest player in the space by market cap and in nearly every category it competes in, CBRE serves the real estate needs of 90 of the Fortune 100 companies. Key to this success has been the company’s industry-leading brand reputation, its localized expertise, and a platform that melds complementary business lines to serve its corporate clientele. The firm’s business mix has increasingly been shifting from transactional revenues toward more contractual revenues over the past decade as it diversifies its business across four dimensions: asset types, business lines, clients, and geographic markets.

Narrow-moat-rated CBRE’s fourth-quarter results were largely in line with our expectations as the firm's advisory services segment staged a recovery while its outsourcing segment remained robust. We believe the brokerage business should perform relatively well in the second half of 2024 but transaction volume will remain under pressure in the first half of the year, due primarily to our macroeconomic and interest rate outlooks. The company reported core EPS of $1.38 per share for the fourth quarter, 17% higher than the FactSet consensus estimate of $1.18. Additionally, fourth-quarter core EPS was roughly 7% higher year over year on a constant-currency basis.

CBRE Group has overseen a boom in the commercial real estate services industry since the nadir of the real estate-driven financial crisis of 2007. As the largest player in the space by market cap and in nearly every category it competes in, CBRE serves the real estate needs of 90 of the Fortune 100 companies. Key to this success has been the company’s industry-leading brand reputation, its localized expertise, and a platform that melds complementary business lines to serve its corporate clientele. The company’s business mix has increasingly been shifting from transactional revenues toward more contractual revenues over the past decade as it diversifies its business across four dimensions: asset types, business lines, clients, and geographic markets.

Narrow-moat-rated CBRE's third-quarter results were largely in line with our expectations, as the advisory and real estate investment businesses were affected by low transaction volume and higher interest rates, but the outsourcing segment remained robust. We believe that the brokerage business will remain under pressure in the near term given our macroeconomic outlook and rising interest rates. The company reported core EPS of $0.72 per share in the third quarter, 7.1% higher than the FactSet consensus estimate of $0.67 per share. Core EPS in the third quarter was approximately 36% lower on a year-over-year basis.

Narrow-moat-rated CBRE Group reported middling second-quarter results as the outsourcing business remained solid, but the advisory sales business was impacted by lower transaction volume. We think that the brokerage business will continue to remain under pressure in the near term given our macroeconomic outlook and rising interest rates. The company reported core EPS of $0.82 per share in the first quarter, 8% higher than the FactSet consensus estimate of $0.76 per share. The core EPS in the second quarter was approximately 55% lower on a year-over-year basis. CBRE shares were down around 5% after the company released the results. CBRE reduced its earnings guidance for full-year 2023, with core earnings per share expected to decline by 20%-25% compared with the previous guidance of low to mid double digits. The guidance downgrade can mostly be attributed to a higher-than-expected decline in the advisory and real estate investment segments.

CBRE has overseen a boom in the commercial real estate services industry since the nadir of the real estate-driven financial crisis of 2007. As the largest player in the space by market cap and in nearly every category it competes in, CBRE serves the real estate needs of 90 of the Fortune 100 companies. Key to this success has been the company’s industry-leading brand reputation, its localized expertise, and a platform that melds complementary business lines to serve its corporate clientele. The company’s business mix has increasingly been shifting from transactional revenues toward more contractual revenues over the past decade as it diversifies its business across four dimensions: asset types, business lines, clients, and geographic markets.

Narrow-moat-rated CBRE’s first-quarter results were largely in line with our expectations, as the outsourcing business remained solid but the brokerage business was affected by lower transaction volume. We think the pressure on the brokerage business will intensify this year, given our macroeconomic outlook and rising interest rates. The company reported core earnings per share of $0.92 in the first quarter, 7% higher than the FactSet consensus estimate of $0.86 and 31% lower in constant currency on a year-over-year basis. The shares were up around 9% after the company released results. CBRE maintained its earnings guidance for the full year, with core EPS expected to decline by low to mid-double digits this year. Management also said it expects adjusted earnings to recover sharply in 2024 and exceed the previous peak. We think the company’s guidance is a bit aggressive, since we expect the brokerage business to remain under pressure for a couple of years. We are maintaining our $90 fair value estimate after incorporating first-quarter results.

CBRE Group has overseen a boom in the commercial real estate services industry since the nadir of the real estate-driven financial crisis of 2007. As the largest player in the space by market cap and in nearly every category it competes in, CBRE serves the real estate needs of 90 of the Fortune 100 companies. Key to this success has been the company’s industry-leading brand reputation, its localized expertise, and a platform that melds complementary business lines to serve its corporate clientele. The company’s business mix has increasingly been shifting from transactional revenues toward more contractual revenues over the past decade as it diversifies its business across four dimensions: asset types, business lines, clients, and geographic markets.

Narrow-moat-rated CBRE Group’s fourth-quarter results were largely in line with our expectations, as rising interest rates weighed on the capital markets business but the outsourcing business remained resilient. The company reported core earnings per share of $1.33 in the fourth quarter, beating the FactSet consensus estimate of $1.19. Core EPS declined 26% from the year-ago quarter. Companywide net revenue was reported at $5.0 billion, an 11% decrease from the same quarter last year. Core EBITDA came in at $668 million, about 30% lower compared with the previous year. We are maintaining our $90 fair value estimate after incorporating fourth-quarter results.

The commercial real estate, or CRE, service industry has overseen a period of rapid growth since the nadir of the real estate-driven financial crisis of 2007. The industry recovered rapidly since the pandemic with record profitability in 2021 on the back of low interest rates, increased availability of capital, strong real estate valuations, and an upbeat economic environment. However, investors are increasingly worried about the prospects of CRE service firms amid the currently challenging macroeconomic environment with rapidly increasing interest rates and a slowing economy. We think that CRE service firms are in much better shape to weather the upcoming economic downturn with strong balance sheets and an ability to better control their expenses. In addition to this, some of the companies in the sector have materially increased their earnings contributions from business lines like facility management, project management, and loan servicing that are less cyclical than their legacy brokerage business over the past decade.

CBRE Group has overseen a boom in the commercial real estate services industry since the nadir of the real estate-driven financial crisis of 2007. As the largest player in the space by market cap and in nearly every category it competes in, CBRE serves the real estate needs of 90 of the Fortune 100 companies. Key to this success has been the company’s industry-leading brand reputation, its localized expertise, and a platform that melds complementary business lines to serve its corporate clientele. The company’s business mix has increasingly been shifting from transactional revenues toward more contractual revenues over the past decade as it diversifies its business across four dimensions: asset types, business lines, clients, and geographic markets.

Narrow-moat-rated CBRE posted underwhelming third-quarter results, as rising interest rates and a slowing economy weighed on the company’s brokerage business. The company reported core EPS of $1.13 per share in the third quarter, below the FactSet consensus estimate of $1.26 per share. The core EPS was 19% lower on a year-over-year basis. The companywide net revenue was reported at $4.6 billion in the current quarter, an 11% increase compared with the same quarter of last year. Core EBITDA came in at $606 million, which is about 17% lower compared with the previous year because of the inherent operating leverage in the company’s business. Most of the decline in core EBITDA came from the advisory business of the company. We are reducing our fair value estimate to $90 per share from $94 per share after incorporating third-quarter results because of subdued near-term margin and growth expectations.

CBRE Group has overseen a boom in the commercial real estate services industry since the nadir of the real estate-driven financial crisis of 2007. As the largest player in the space by market cap and in nearly every category it competes in, CBRE serves the real estate needs of 90 of the Fortune 100 companies. Key to this success has been the company’s industry-leading brand reputation, its localized expertise, and a platform that melds complementary business lines to serve its corporate clientele. The company’s business mix has increasingly been shifting from transactional revenues toward more contractual revenues over the past decade as it diversifies its business across four dimensions: asset types, business lines, clients, and geographic markets.

CBRE Group has overseen a boom in the commercial real estate services industry since the nadir of the real estate-driven financial crisis of 2007. As the largest player in the space by market cap and in nearly every category it competes in, CBRE serves the real estate needs of 90 of the Fortune 100 companies. Key to this success has been the company’s industry-leading brand reputation, its localized expertise, and a platform that melds complementary business lines to serve its corporate clientele. The company’s business mix has increasingly been shifting from transactional revenues toward more contractual revenues over the past decade as it diversifies its business across four dimensions: asset types, business lines, clients, and geographic markets.

Narrow-moat CBRE posted solid second-quarter results, but rising interest rates and a slowing economy are major headwinds for the company in the medium term. We expect real estate transactional volume to slow in the upcoming quarters due to a slowing macroeconomic environment, resulting in a material impact on the company’s brokerage business. Management also expects investment sales, and to a lesser degree leasing, to decline in the back half of the year against the elevated levels of 2021.

CBRE Group has overseen a boom in the commercial real estate services industry since the nadir of the real estate-driven financial crisis of 2007. As the largest player in the space by market cap and in nearly every category it competes in, CBRE serves the real estate needs of 90 of the Fortune 100 companies. Key to this success has been the company’s industry-leading brand reputation, its localized expertise, and a platform that melds complementary business lines to serve its corporate clientele. The company’s business mix has increasingly been shifting from transactional revenues toward more contractual revenues over the past decade as it diversifies its business across four dimensions: asset types, business lines, clients, and geographic markets.

Narrow-moat-rated CBRE Group posted strong first-quarter results, comfortably beating the FactSet consensus estimate of $1.08 per share with reported adjusted EPS of $1.39. The firm delivered impressive results on all fronts with companywide net revenue of $4.37 billion, a 30% increase on a year-over-year basis. Adjusted EBITDA also came in strong for the current quarter at $732 million, 56% higher compared with first-quarter 2021. This resulted in an adjusted EBITDA margin of 16.7% for the quarter, up 280 basis points compared with last year and up 180 basis points from the first quarter of 2019. After incorporating the first-quarter results, we are reducing our fair value estimate to $100 per share from $102.

CBRE Group has overseen a boom in the commercial real estate services industry since the nadir of the real estate-driven financial crisis of 2007. As the largest player in the space by market cap and in nearly every category it competes in, CBRE serves the real estate needs of 90 of the Fortune 100 companies. Key to this success has been the company’s industry-leading brand reputation, its localized expertise, and a platform that melds complementary business lines to serve its corporate clientele. The company’s business mix has increasingly been shifting from transactional revenues toward more contractual revenues over the past decade as it diversifies its business across four dimensions: asset types, business lines, clients, and geographic markets.

CBRE Group has overseen a boom in the commercial real estate services industry since the nadir of the real estate-driven financial crisis of 2007. As the largest player in the space by market cap and in nearly every category it competes in, CBRE serves the real estate needs of 90 of the Fortune 100 companies. Key to this success has been the company’s industry-leading brand reputation, its localized expertise, and a platform that melds complementary business lines to serve its corporate clientele. The company’s business mix has increasingly been shifting from transactional revenues toward more contractual revenues over the past decade as it diversifies its business across four dimensions: asset types, business lines, clients, and geographic markets.