We have recently lowered the long-term recommendation for
CBRE Group Inc.
), the world's largest commercial real estate services firm in
terms of fiscal 2011 revenue, from Outperform to Neutral as we
anticipate it will perform in line with the broader market.
CBRE Group is the global market leader in commercial real estate
brokerage and advisory services for property leasing and sales,
forecasting, valuations, origination and servicing of commercial
mortgage loans, as well as project and real estate investment
management. The company has extensive knowledge of domestic and
international real estate markets that enables it to operate as a
single-source provider of real estate solutions.
CBRE Group has hard-to-replicate intellectual capital and
technology resources for analytical, research and client service
tools that enable it to meet diverse client needs. The company
offers a full range of services to occupiers, owners, lenders and
investors in office, retail, industrial, multi-family and other
types of commercial real estate.
CBRE Group reported relatively strong first quarter 2012
results, with recurring earnings beating the Zacks Consensus
Estimate by $0.01, primarily due to the gradual revival of the
overall economy, albeit at a tepid and inconsistent pace.
Management further expects to continue the growth momentum in 2012
with a diverse operating platform, premier brand, and a global
footprint. We also remain encouraged by indications of
stabilization and recovery of market conditions.
However, CBRE Group faces stiff competition from international,
regional, and local players in the market due to which it has to
continually invest in value drivers that act as key differentiators
against its rivals. This undermines its long-term profitability to
In addition, CBRE Group has a significant development pipeline
totaling $4.8 billion by the end of first quarter 2012, which
exposes it to rising construction costs, entitlement delays and
lease-up risk amid challenging macroeconomic environment.
The company also faces unfavorable foreign currency movements
due to its international presence, which often impact its top-line
growth. Any future slowdown in the global economy or the real
estate industry as a whole will have an adverse impact on its
leasing business, and consequently hamper its long-term growth
We presently have a Zacks #3 Rank for CBRE Group, which
translates into a short-term Hold rating. We also have a Neutral
rating and a Zacks #3 Rank for
NorthStar Realty Finance Corp.
), one of the peers of CBRE Group.
CBRE GROUP INC (CBG): Free Stock Analysis
NORTHSTAR RLTY (NRF): Free Stock Analysis
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