Real estate services firm,
CBRE Group Inc.
) reported second-quarter 2014 adjusted earnings of 36 cents per
share, a penny ahead of the Zacks Consensus Estimate and up 16%
year over year. Results were driven by solid growth in leasing,
particularly in the U.S. On a GAAP basis, CBRE reported earnings of
32 cents per share, reflecting a 52% hike from 21 cents earned in
the prior-year quarter.
Revenues came in at around $2.1 billion, slightly ahead of the
Zacks Consensus Estimate and up 22% year over year. Adjusted
earnings before interest, taxes, depreciation and amortization
(adjusted EBITDA) came in at $262.8 million, reflecting an increase
of 8% from the prior-year quarter.
Considering business lines, property leasing revenue improved 14%
while the company's occupier outsourcing business - Global
Corporate Services' (GCS) revenue increased 58%. Moreover,
global property sales revenue climbed 5% during the quarter.
However, the company experienced reduced mortgage origination
activity with GSEs.
The company signed 47 outsourcing contracts during the second
quarter and 110 contracts in the first half of 2014.
Cbre Group, Inc - Earnings Surprise |
Quarter in Detail
Geographically, EMEA Region (primarily Europe) was a top performer
with 89% year over year growth in revenue (82% in local currency),
driven by solid contributions from the acquisition of Norland
Managed Services Ltd. as well as higher property sales and occupier
CBRE's largest business segment - Americas Region - also registered
double-digit revenue growth (11% year over year). Sound results
were prompted by higher leasing and occupier outsourcing
Furthermore, helped by notable growth in Australia, the Asia
Pacific Region reported 3% year over year growth in U.S. dollars
(9% in local currency as foreign currency conversions muted the
growth to some extent).
Revenue increased 27% year over year at Development Services (real
estate development and investment activities primarily in the U.S.)
while revenue at Global Investment Management (investment
management operations in the U.S., Europe and Asia) grew 10% year
Following the Norland acquisition, the company's contractual
revenue increased to 53% of its total revenue, from 47% in the
year-ago period. This shift in its business mix toward greater
contractual revenue along with conservative financial management,
resulted in upgrade of CBRE's secured debt rating to Investment
Grade by Standard & Poor's in the quarter.
CBRE exited second-quarter 2014 with cash and cash equivalents of
$381.9 million, down from $491.9 million at year-end 2013.
Following a solid performance in the first half of this year, the
company has raised its adjusted earnings per share expectation by 5
cents from the initial outlook. Particularly, CBRE now expects full
year earnings in the range of $1.60-$1.65. The Zacks Consensus
Estimate of $1.63 per share also lies within this range.
Earnings beat, albeit by a cent, is encouraging and we believe
that improving leasing, property sales and outsourcing
business augur well for the company going forward. Despite the
reduced mortgage origination for the GSEs and unfavorable foreign
currency movement, we believe that the strategic investments in
people and platform hold long-term promise for this Zacks Rank #2
(Buy) stock and would help it to enhance its market share.
Moreover, strategic buyouts have played a vital role in enhancing
CBRE's geographic coverage as well as broadening its service
offerings. With market conditions continuing to improve, we believe
that opportunistic acquisitions would serve as growth drivers,
supplementing the company's organic growth.
Investors interested in the real estate industry may consider
stocks like CBS Outdoor Americas Inc. (
), Alexander & Baldwin, Inc. (
) and AV Homes, Inc. (
). All these stocks carry a Zacks Rank #2 (Buy).
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