What's in the Offing for CBRE Group's (CBRE) Q3 Earnings?

CBRE Group, Inc. CBRE is slated to release third-quarter 2020 earnings on Oct 29, before the bell. Results are anticipated to display year-over-year declines in revenues and earnings.

In the last reported quarter, this Los Angeles, CA-based commercial real estate services and investment firm delivered a 16.67% earnings surprise. The company’s continued expansion of its contractual businesses over the past decade supported CBRE Group’s performance amid the coronavirus mayhem.

Over the preceding four quarters, the company surpassed estimates on three occasions and missed in the other, the average beat being 5.9%. The graph below depicts this surprise history:

CBRE Group, Inc. Price and EPS Surprise

CBRE Group, Inc. Price and EPS Surprise

CBRE Group, Inc. price-eps-surprise | CBRE Group, Inc. Quote

Let’s see how things have shaped up prior to this announcement.

Factors at Play

CBRE Group is likely to have continued its focus for a better-balanced and more resilient business model during the September-end quarter, shifting the company’s business mix toward a more contractual one.

Moreover, the company has made concerted efforts in recent years to strengthen its Global Workplace Solutions (GWS) segment, which provides a broad suite of integrated, contractually-based services to occupiers of real estate, including facilities management, project management, transaction management and management consulting. In addition, the firm has grown organically and banked on strategic in-fill acquisitions to boost its service offerings and geographic reach over the years. Strategic reinvestments in the company’s business, specifically on the technology front, also differentiate CBRE Group from its peers.

However, the pandemic has given rise to significant amounts of uncertainty, interruption of business activity and impact on global markets as well as consumer and business sentiments. Amid these, the U.S. capital market transaction activity remained subdued during the third quarter. Nevertheless, though, capital markets and leasing activity are likely to reflect declines year on year, a sequential uptick is anticipated.

In its advisory business, revenues from leasing and property sales are likely to have registered substantial declines year on year though sequentially the figures might have improved. Furthermore, though the company’s GWS business is likely to have been comparatively resilient during the quarter under review, growth might have been restrained given the economic uncertainty and operational challenges.

The Zacks Consensus Estimate for quarterly revenues is currently pegged at $5.59 billion, suggesting a decline of 5.6% year on year.

The Zacks Consensus Estimate for third-quarter fee revenues from Advisory Services is currently pinned at $1,428 million, indicating a decline from the prior-year quarter’s $1,988 million but up from the prior quarter’s $1,339 million.

However, the estimate for Global Workplace Solutions’ fee revenues is $837 million, suggesting an increase from the previous quarter’s $755 million. Fee revenues from Real Estate Investments are estimated at $208 million in the to-be-reported quarter, calling for a rise from the second quarter’s $162 million.

CBRE Group’s activities during the July-September period were inadequate to win analysts’ confidence. The Zacks Consensus Estimate for quarterly earnings remained unchanged at 44 cents over the past month. The figure also suggests a slump of 44.3% year on year.

Here is what our quantitative model predicts:

Our proven model does not conclusively predict a positive earnings surprise for CBRE Group this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

CBRE Group currently carries a Zacks Rank #4 (Sell) and has an Earnings ESP of 0.00%.

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 quarter:

Lexington Realty Trust LXP, set to report quarterly numbers on Nov 5, currently has an Earnings ESP of +1.33% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

National Storage Affiliates Trust NSA, slated to release third-quarter earnings on Nov 5, has an Earnings ESP of +1.94% and a Zacks Rank of 2 at present.

Ventas, Inc. VTR, scheduled to announce earnings results on Nov 6, has an Earnings ESP of +2.03% and a Zacks Rank of 3 at present.

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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.

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