Why Should You Add CBRE Group (CBG) Stock to Your Portfolio?
CBRE Group, Inc.CBG has secured the top spot in the global rankings for commercial real estate investment sales for 2017. The data is per Real Capital Analytics (RCA). This, in fact, is the seventh consecutive year of the company achieving the first position. In fact, per the RCA data, CBRE had 22.3% market share in 2017 across all property types on a global basis, which is a massive 650 basis points ahead of its closest competitor.
Notably, CBRE has decided to change its NYSE ticker symbol to CBRE from CBG. It will start trading under the new symbol from Mar 19, 2018.
In addition, this Zacks Rank #2 (Buy) stock has gained 10.1% in the past three months against 1.1% decline of its industry . The stock is likely to gain further in the near term, as there are a number of favorable factors.
Why a Solid Choice?
Revenue and Earnings Strength: CBRE Group's broad range of real estate products and services, and an extensive knowledge of domestic and international real estate markets retained its solid growth momentum.
Also, acquisitions have played a vital role in expanding its business. In fact, the company's M&A activity increased in 2017 with 11 acquisitions. Moreover, it has completed more than 120 acquisitions since 2002. As market conditions continue to improve, we believe these opportunistic acquisitions and strategic investments will likely serve as growth drivers, supplementing its organic growth.
Further, CBRE Group has a flourishing occupier outsourcing business and continues to capitalize on the growth opportunities offered by this category. Business activity remained solid in fourth-quarter 2017 with 51 new, 54 expanded and 40 renewal contracts. Moreover, solid pipeline growth reflects expanded capabilities and the company expects solid mid-teens growth in fee revenues in 2018.
For full-year 2017, revenues and earnings reached all-time highs. The company achieved 18% growth in full-year adjusted earnings per share and it marked the eighth consecutive year of double-digit adjusted earnings per share growth. Further, CBRE Group expects 2018 adjusted earnings per share in the band of $3.00-$ 3.15, denoting a projected increase of 13% at the mid-point of the range. Moreover, the company is focused on a better-balanced and more resilient business model. Its contractual revenues and leasing, largely recurring over time, constituted 74% of total fee revenues in fourth-quarter 2017 compared with 61% in 2006.
Additionally, CBRE's projected sales growth of 10.05% for 2018 is ahead of the breakeven estimated for the industry. The company has witnessed 17.8% growth in EPS in the last three to five years compared with the industry's 2.9% increase. Its projected EPS growth rate for 2018 is around 12.9%.
Cash Flow Growth: CBRE enjoyed 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 12.1% increase estimated for the industry.
Superior ROE: CBRE's return on equity is 25.03% compared with the industry's average of 3.61%. This highlights that the company reinvests more efficiently compared to the industry.
Estimate Revisions: CBRE has also been witnessing solid positive estimate revisions, of late. In fact, the Zacks Consensus Estimate for 2018 earnings moved up 2.7% to $3.06 in a month's time. Also, the same for 2019 increased 1.2% to $3.30, during that period. This reflects analysts' bullish sentiments on the stock.
Other Stocks to Consider
Investors can also consider other top-ranked stocks in the real estate space like HFF Inc. HF , FirstService Corp. FSV and Jones Lang LaSalle Incorporated JLL . While HFF has a Zacks Rank #1 (Strong Buy), FirstService and Jones Lang LaSalle carry a Zacks Rank of 2. You can see the complete list of today's Zacks #1 Rank stocks here .
HFF's Zacks Consensus Estimates for 2018 earnings per share have been revised 22.6% upward to $2.88 over the past month. Its share price has risen 9.2% in three months' time.
FirstService Corporation's earnings per share estimates for the current year have moved up 11.8% to $2.65 in two months' time. Its shares have gained 2.9% over the past three months.
Jones Lang LaSalle's earnings per share estimates for 2018 have been revised 7.9% upward to $9.85 in two months' time. The stock has rallied 16.5% during the past three months.
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