CBRE Group Inc.
), the world's largest commercial real estate services firm in
terms of 2011 revenue, reported relatively unimpressive results
in the third quarter of 2012 as sovereign debt crisis in Europe
and a slow growth trajectory in Asia pegged back its momentum.
Total revenues in the reported quarter were $1.56 billion
compared with $1.53 billion in the year-earlier quarter,
reflecting a year-over-year increase of a paltry 1%.
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The company reported a net income of $39.7 million or 12 cents
per share during the quarter, compared with $63.8 million or 20
cents in the year-ago period. Excluding non-recurring items, CBRE
Group reported a net income of $83.6 million or 26 cents per
share during the reported quarter, compared with $77.7 million or
24 cents in the year-earlier quarter. Recurring earnings spiked
7.6% year over year, while recurring EPS rose 8.3% compared to
the third quarter of 2011. However, recurring earnings in the
reported quarter missed the Zacks Consensus Estimate by 7 cents.
Third quarter 2012 EBITDA (earnings before interest, tax,
depreciation and amortization) excluding selected charges
increased marginally to $195.3 million, compared to $194.8
million in the year-ago quarter. The company undertook diligent
steps to trim down its operating expenses and aligned the cost
base with reduced business volumes in tune with the relentless
Despite the headwinds, CBRE Group signed 67 long-term real estate
outsourcing contracts during the quarter as property owners hired
third-party service providers to manage their properties to
reduce operating costs. The company was able to strengthen its
footprint in the Asia Pacific region by acquiring its affiliate
company in Vietnam for an undisclosed amount. The transaction
enabled CBRE Group to offer seamless integrated services to cater
to the increasing demands of South-East Asia.
The acquiree, CB Richard Ellis (Vietnam) Co. Ltd., provides a
host of services in the region: property sales, office and retail
leasing, occupier advisory services, residential project
marketing, property and facilities management, project
management, consulting, research and valuation. With such a
diverse product portfolio, the affiliate company was a leading
real estate service provider in Vietnam and had a significant
Geographically, revenue in the Americas (U.S., Canada and Latin
America) increased 4% in third quarter 2012 to $996.4 million. In
the Asia-Pacific region, revenue dipped 4% due to slower economic
growth, which resulted in lower sales and leasing activities.
Revenues for the EMEA region (Europe, Middle East and Africa)
declined 17% to $228.7 million during the reported quarter due to
the continued weak economic growth in Europe.
The Global Investment Management segment, comprising investment
management operations in the U.S., Europe and Asia, reported
revenues of $114.3 million during the reported quarter compared
with $77.4 million in the year-earlier quarter. The strong
revenue growth was attributable to the ING Real Estate Investment
Management business that was acquired by CBRE Group in the second
half of 2011, and was fully integrated with its existing
investment management business by the first quarter of 2012.
Assets under management totaled $90.4 billion at quarter-end,
down 4% from year-end 2011.
During the reported quarter, the Development Services segment
which includes real estate development and investment activities
primarily in the U.S., reported revenues of $17.8 million
compared with $18.8 million in the year-ago quarter. The
development pipeline of the company totaled $4.6 billion at
The gradual revival of the domestic economy, albeit at a tepid
and inconsistent pace, has somewhat helped the company to tide
over the negative effects faced by the adversaries in Europe and
Asia. Management further expects to improve its operating
efficiency with a diverse operating platform, premier brand, and
a strong workforce.
At quarter-end, CBRE Group had cash and cash equivalents of
$776.3 million compared to $1.1 billion at year-end 2011. Total
net debt at the end of the quarter was $1.8 billion, up $117
million from year-end 2011. For full year 2012, the company
expects recurring earnings in the range of $1.15 to $1.20 per
We maintain our Neutral recommendation for the stock, which
currently has a Zacks #3 Rank that translates into a short-term
Hold rating. We also have a Neutral recommendation and a Zacks #4
Rank (short-term Sell rating) for
Jones Lang LaSalle Inc.
), one of the competitors of CBRE Group.