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CBRE Group Upgraded to Hold - Analyst Blog
On Nov 26, 2013, Zacks Investment Research upgraded CBRE Group Inc. ( CBG ) to a Zacks Rank #3 (Hold). The upgrade came on the back of CBRE Group's solid and flexible capital structure, growing outsourcing, leasing and investment management business, strategic acquisitions as well as its investments in people and systems.
Why the Upgrade?
Aided by a rise in revenues, CBRE Group's third-quarter 2013 adjusted earnings came in at 30 cents per share, up 15% from the prior-year quarter. Property sales remained the leading growing service line in the third quarter, while leasing growth accelerated and occupier outsourcing posted double-digit growth.
However, with expenses acting as a dampener, the company missed the Zacks Consensus Estimate by 3 cents. Also, commercial mortgage brokerage revenue slipped owing to the negative impact from the U.S. GSEs initiatives to scale back their lending activity, as commanded by their regulators.
During the quarter, CBRE signed a total of 54 Global Corporate Services (GCS) contracts, including 20 with new customers such as Heinz, Tesla Motors Inc. ( TSLA ) and EMG, a Japan-based petroleum and petrochemical company.
In October, CBRE penned one of its largest ever outsourcing deals with JPMorgan Chase & Co. ( JPM ) for offering the bank management and brokerage services facilities in the U.S., Canada and Latin America and project management services in the U.S. and Asia Pacific.
In recent times, the company opted for a number of strategic acquisitions including CB Richard Ellis Carmody, KLMK Group, Alan Selby & Partners to expand its business in the U.S. and UK.
The company is also in a deal to acquire UK-based commercial building technical engineering services provider, Norland Managed Services Ltd. for increasing its capabilities and expanding its corporate outsourcing platform in Europe. We believe that such opportunistic acquisitions would serve as growth drivers, supplementing the company's organic growth. Moreover, the company's investments in people and systems augur well.
Owing to these positives, the company witnessed a rise in estimates in recent times. Over the last 7 days, though the Zacks Consensus Estimate for 2013 remained flat at $1.43 per share (within the guidance range provided by CBRE Group), for 2014 it moved north 1.2% to $1.70 per share.
Additionally, the long-term earnings growth forecast for the company is 14.97%. Hence, the favorable estimate revisions, driven by its improving business lines and expansion efforts made way for the rank upgrade.
Other Stock to Consider
However, one can look at the other better-ranked stock in the same sector - E-House (China) Holdings Ltd. ( EJ ) which has a Zacks Rank #1 (Strong Buy).
CBRE GROUP INC (CBG): Free Stock Analysis Report
E-HOUSE CHINA (EJ): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
TESLA MOTORS (TSLA): Free Stock Analysis Report
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