CBRE Group Inc.
) fourth-quarter 2013 adjusted earnings came in at 67 cents per
share, a penny ahead of the Zacks Consensus Estimate and up 22%
year over year.
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Quarterly results were driven by strong contribution from the
global investment management and property sales, improved leasing
momentum and occupier outsourcing business. Yet, commercial
mortgage brokerage revenue continued to decline owing to the
negative impact from the U.S. Government-Sponsored Enterprises'
(GSEs) initiatives to scale back their lending activity, as
commanded by their regulators.
On a GAAP basis, CBRE reported earnings of 34 cents per share,
down from 53 cents in the prior-year quarter. The downturn
reflected $74.3 million (22 cents per share) charge related to
non-cash intangible asset impairment in the Global Investment
Management segment in continental Europe.
Revenues came in at $2.23 billion, marginally above the Zacks
Consensus Estimate of $2.17 billion and up 11% year over year.
Adjusted earnings before interest, taxes, depreciation and
amortization (adjusted EBITDA) came in at $392.7 million,
reflecting a year-over-year increase of 12% from the prior-year
For full-year 2013, CBRE reported adjusted earnings of $1.43 per
share on revenues of $7.2 billion. Results show an improvement
from the prior year when the company had earned $1.22 per share
on revenues of $6.5 billion.
Quarter in Detail
Notably, CBRE signed 32 outsourcing contracts with new customers
during the fourth quarter. The company created a record by
penning 96 outsourcing contracts with new customers for 2013.
CBRE Group has been actively engaged in deals for expanding
business in the U.S. and U.K. During the quarter, CBRE disclosed
the completion of the acquisition of U.K.-based commercial
building technical engineering services provider - Norland
Managed Services Ltd. The move is expected to substantially drive
the company's Global Corporate Services (GCS) business in EMEA.
Furthermore, a total of 5 acquisitions were made in the fourth
quarter and 10 in full-year 2013. This included Whitestone
Research Corporation, Alan Selby & Partners, CAC Group, CB
Richard Ellis Carmody and KLMK Group.
Americas Region (U.S., Canada and Latin America): This segment,
which is the company's largest business segment, experienced a 9%
year-over-year increase in revenue to $1.4 billion. Even amid a
tepid macro environment, the company's leasing business continued
EMEA Region (primarily Europe): Buoyed by enhanced performance
across major business lines and led by property sales, revenues
increased 21% year over year to $432.7 million. Particularly, the
U.K. as well as in the Netherlands and Spain were strong.
Asia Pacific Region (Asia, Australia and New Zealand): Revenues
were up 3% year over year to $255.6 million. While performance in
a number of countries like Australia, India and Japan improved,
it was mostly dwarfed by the negative impact of foreign currency
Global Investment Management Business (investment management
operations in the U.S., Europe and Asia): Revenues climbed 36%
year over year to $168.0 million as a result of the
carried-interest revenue, reflecting incremental revenue that
CBRE earned when assets in the investment portfolio are disposed
at values that surpass the target return thresholds. Assets under
management (AUM) totaled $89.1 billion at the end of the fourth
quarter, reflecting a sequential uptick of 2% and a
year-over-year drop of 3%.
Development Services (real estate development and investment
activities primarily in the U.S.): Revenues declined 35% year
over year to $18.4 million, due to low rental revenues following
the property sales as well as lower incentive development fees.
The development projects in process aggregated $4.9 billion, up
17% from year-end 2012 while the inventory of pipeline deals
totaled $1.5 billion, depicting a decline of 29% from year-end
CBRE exited the year with cash and cash equivalents of $491.9
million, compared with $1.1 billion at year-end 2012.
CBRE expects its adjusted earnings per share guidance to come in
the range of $1.55-$1.60 for full-year 2014. This entails 10%
growth rate considering the mid-point of the range. The company
expects double-digit revenue escalations in both global property
sales and occupier outsourcing in addition to continued growth in
With market conditions continuing to improve, we believe that
opportunistic acquisitions would serve as growth drivers,
supplementing the company's organic growth. Improving
outsourcing, leasing and investment management business also
augur well going forward.
Yet currently, we believe that the regulatory limits on GSEs
lending would continue to pressurize revenue and profits for the
commercial mortgage brokerage business of this Zacks Rank #4
However, other players in the real estate operations industry,
which look attractive at current levels, include
NorthStar Realty Finance Corp.
Jones Lang LaSalle Incorporated
RE/MAX Holdings, Inc.
). All these stocks carry a Zacks Rank #2 (Buy).