CBRE Group Inc. CBRE offers a broad range of real estate products and services, and has extensive knowledge of domestic and international real estate markets. The company's market-leading position will help it capitalize on commercial real estate tailwinds.
The company banks on tie-ups and in-fill acquisitions to widen its geographic coverage, as well as expand and reinforce service offerings. In sync with such efforts, CBRE Group recently announced that it has agreed to collaborate with Excellerate Property Services to form a joint venture named CBRE Excellerate in Africa and the Middle East. It will help the company capitalize on the increasing demand for superior real estate services in the region.
Moreover, notable acquisitions in the recent quarters include FacilitySource, which is a leader in technology-based procurement and facility management solutions in the United States, and Noveen Consulting, a consulting firm focused on serving healthcare facility owners.
Although this Zacks Rank #2 (Buy) stock has lost 2.3% of its value in the past month, reflecting broader market concerns, the decline was narrower than its industry
's slip of 4.2%. The stock is likely to gain in the near term on a number of favorable factors and the current price offers a good entry point. Also, the 2018 and 2019 earnings estimate revision trends are pretty decent. What Makes It a Solid Choice? Market-Leading Position:
As the largest commercial real estate services and investment firm (based on 2017 revenues), CBRE Group has a robust scale. It is among the few companies offering a full suite of services to multi-national clients. This leading position is likely to give it a competitive edge in banking on the commercial real estate industry tailwinds.
Moreover, the company has grown organically and banked on strategic in-fill acquisitions to boost its service offerings and geographic reach. With an expanded capability to service, the company's number of large clients has increased from 19 in 2012 to 82 in 2017.
As large corporations continue to seek consolidation of the number of service providers, CBRE Group is expected to remain a beneficiary of this trend. Additionally, strategic reinvestment in its business, specifically on the technology front, is expected to set CBRE Group apart from the company's peers.
The company has seen 16.7% EPS growth in the last three to five years compared with the industry's 5.8%. Moreover, the projected 2018 EPS growth rate is around 17.7% as against the industry's 11.2%.
Recurring Revenue Model: CBRE Group has opted for a better-balanced and more resilient business model by shifting the revenue mix toward more contractual sources and leasing. Contractual revenues and leasing, largely recurring over time, constituted 75% of total fee revenues in third-quarter 2018 compared with 61% in 2006. This makes the company resilient to market disruptions and positions it well to achieve top- and bottom-line growth amid capital market headwinds.
In fact, CBRE Group's projected sales growth of 47.3% for 2018 compares favorably with the breakeven estimated for the industry.
Flourishing Occupier Outsourcing Business: Occupiers of real estate are increasingly opting for outsourcing and depending on the expertise of third-party real estate specialists to achieve improvement in execution and efficiency. With a market-leading position and being one of the few companies boasting occupier outsourcing capabilities on a global scale, CBRE Group remains well poised to capitalize on the favorable trends.
In fact, growth was broad based with total contracts in third-quarter 2018, comprising 40 new, 82 expansions and 28 renewals. Furthermore, the company continues to achieve diversification in terms of client-industry mix, which is impressive, while the FacilitySource acquisition has strengthened the company's facilities management capabilities.
Cash Flow Growth: CBRE Group recorded historical cash flow growth (three to five years) of 17.5%, which comfortably exceeded 11.3% growth registered by the industry. Also, its current cash flow growth of 16.0% compares favorably with the 12.3% increase estimated for the industry.
Notably, the company enjoys liquidity of around $3.1 billion as of Sep 30, 2018, and has a low leverage level. This adequate liquidity and cash flow offer the company a solid platform for growth.
Superior ROE: CBRE Group's return on equity is 23.45% compared with the industry's average of around 5.09%. This shows that the company reinvests more efficiently compared to the industry.
Other Key Picks
Investors interested in the real estate industry can consider some other top-ranked stocks like Colliers International Group Inc. CIGI , HFF, Inc. HF and Jones Lang LaSalle Inc. JLL . While Colliers International currently flaunts a Zacks Rank of 1 (Strong Buy), HFF and Jones Lang LaSalle carry a Zacks Rank of 2. You can see the complete list of today's Zacks #1 Rank stocks here .
Colliers International's Zacks Consensus Estimate for 2018 earnings moved 6.7% north to $3.99 in two months' time.
The Zacks Consensus Estimate for 2018 earnings for HFF has increased 1.5% to $2.67 over the past two months.
The current-year earnings estimates for Jones Lang LaSalle have climbed 7.5% over the past two months to $10.91.
Wall Street's Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It's a once-in-a-generation opportunity to invest in pure genius.
Click for details >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Colliers International Group Inc. (CIGI): Free Stock Analysis Report Jones Lang LaSalle Incorporated (JLL): Free Stock Analysis Report HFF, Inc. (HF): Free Stock Analysis Report CBRE Group, Inc. (CBRE): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research