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CBRE Group (CBRE) to Post Q3 Earnings: What's in the Cards?

CBRE Group, Inc.CBRE is slated to report third-quarter 2018 results on Nov 1, before the market opens. The company is anticipated to display year-over-year growth in both revenues and earnings.

In the last reported quarter, this Los Angeles, CA-based commercial real estate services and investment firm delivered a 2.78% positive earnings surprise. Results indicate strong revenue growth, driven by leasing, occupier outsourcing and development services.

In fact, CBRE has a decent record of earnings surprise, having surpassed estimates in each of the trailing four quarters, coming up with an average positive beat of 9.49%. The graph below depicts this surprise history:

CBRE Group, Inc. Price and EPS Surprise

CBRE Group, Inc. Price and EPS Surprise | CBRE Group, Inc. Quote

Let's see how things are shaping up for this announcement.

Factors to Consider

CBRE Group has a robust scale as the largest commercial real estate services and investment firm (based on 2017 revenues). It is among the few companies offering a full suite of services to multi-national clients. The company has an extensive knowledge of domestic and international real estate markets. Its market leading position is likely to lend it a competitive edge in capitalizing on the commercial real estate industry tailwinds.

In fact, being the largest commercial real estate services and investment firm (based on 2017 revenues), the company enjoys a robust scale and is among the few companies offering a full suite of services to multinational clients. Moreover, the company has grown organically and banked on strategic in-fill acquisitions to fortify its service offerings and geographic reach.

The company has made concerted efforts to diversify its revenue base over the past years. It has opted for a better-balanced and more resilient business model, and in pursuit of this, shifted the revenue mix toward more contractual sources and leasing. This trend is expected to have continued into the third quarter as well. It makes the company resilient to market disruptions and positions it well to achieve top- and bottom-line growth even amid capital-market headwinds. In addition to these, strategic reinvestment in the company's business, specifically on the technology front, is expected to set CBRE Group apart from its peers.

Furthermore, 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 the Sep-end quarter. The company continues to achieve diversification in terms of client-industry mix, which is impressive.

Amid these, the Zacks Consensus Estimate for third-quarter revenues is currently pegged at $5.15 billion, indicating projected growth of nearly 45% year over year.

Additionally, CBRE Group's activities during the Jul-Sep quarter gained analysts' confidence. The Zacks Consensus Estimate for third-quarter earnings witnessed a marginal increase over the last 30 days and is currently pinned at 75 cents, reflecting estimated growth of around 17.2% year over year.

Nonetheless, shift toward a comparatively lower-margin outsourcing business might strain the company's margins, ahead. Also, after years of witnessing decent growth, commercial real estate transaction volumes have decelerated in the past couple of years. Specifically, the financial markets' volatility, along with inflation trends and hike in interest rates, are compelling investors and lenders to adopt a more cautious approach with respect to underwriting, thereby affecting the sales activity.

Here is what our quantitative model predicts:

CBRE Group has the right combination of two key ingredients - a positive Earnings ESP and Zacks Rank #3 (Hold) or higher - for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Earnings ESP: The Earnings ESP for the company is +0.67%.

Zacks Rank: It carries a Zacks Rank of 2 (Buy), at present.

A positive Earnings ESP is a meaningful and leading indicator of a likely beat. This, when combined with a favorable Zacks Rank, makes us reasonably confident of a positive surprise.

Stocks That Warrant a Look

Here are a few stocks in the broader real estate sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this time around:

UDR Inc.UDR , scheduled to release earnings on Oct 29, has an Earnings ESP of +0.68% and a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Welltower Inc.WELL , slated to release third-quarter results on Oct 30, has an Earnings ESP of +2.04% and a Zacks Rank of 3.

Public StoragePSA , set to report its quarterly numbers on Oct 30, has an Earnings ESP of +1.91% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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