CBRE Group Q2 Earnings Beat, 2024 Outlook Raised

CBRE Group Inc. CBRE reported second-quarter 2024 core earnings per share of 81 cents, ahead of the Zacks Consensus Estimate of 69 cents. However, the reported figure declined 1.2% year over year.

Reflecting positive sentiments, shares of CBRE were up more than 9% so far today. Results reflect growth in its resilient lines of business. Global Workplace Solutions ("GWS") experienced strong business wins with a healthy balance of new clients and expansion. The leasing business performed well due to office leasing revenue growth in the United States, driven by strength in New York. However, the Real Estate Investments segment's revenues decreased year over year.

Quarterly revenues were up 8.7% year over year to $8.39 billion but compared unfavorably with the Zacks Consensus Estimate of $8.52 billion.

Net revenues increased 11% (11.7% in local currency) year over year to $4.97 billion. Core EBITDA rose marginally (1.7% in local currency) to $505 million.

Quarter in Detail

CBRE Group's Advisory Services segment reported a year-over-year revenue increase of 8.6% (9.3% in local currency) to $2.22 billion. Our estimate was nearly the same as reported number.

Global leasing revenues rose 9% (same local currency), driven by leasing revenue growth in the Americas and Asia-Pacific regions.

Global sales revenues fell 3% (2% in local currency) even though property sales revenues began to stabilize. However, mortgage origination revenue rose 38% (same local currency) due to a 20% increase in loan origination fees and higher interest earnings on escrow balances.

The GWS segment registered a year-over-year increase of 9.5% (10.3% in local currency) in revenues to $5.94 billion. Our estimate was pegged at $5.98 billion.

Paced by the sustained strength in the Local business, Facilities management net revenues rose 18% (19% in local currency). Project management net revenues increased 11% (12% in local currency) due to the continued strong growth in Turner & Townsend. Net operating margin improved 20 basis points compared with first-quarter 2024, reflecting the early benefit of recent cost actions, but was below the prior-year period.

The Real Estate Investments segment experienced a decrease of 9.2% (same local currency) in revenues to $232 million.

At the end of the second quarter of 2024, assets under management decreased $1.5 billion from the first quarter of 2024 to $142.5 billion due to lower asset values and an adverse foreign currency movement.

In the second quarter of 2024, CBRE acquired Direct Line Global, which is a leading provider of technical facilities management services for data center owners and operators, for a total cash and non-cash consideration of $290.9 million. CBRE also acquired a provider of local facilities management technical services in Canada.

During the quarter, CBRE also announced its plan to combine its project management business with its Turner & Townsend subsidiary.

Balance Sheet Position

CBRE Group exited the second quarter of 2024 with cash and cash equivalents of $928 million, down from $1.04 billion as of Mar 31, 2024.

As of Jun 30, 2024, CBRE Group had $3.7 billion in total liquidity. This comprised nearly $927.7 million in cash in addition to the ability to borrow a total of approximately $2.7 billion under its revolving credit facilities, net of any outstanding letters of credit. The company's net leverage ratio was 1.58x as of the same date, significantly less than CBRE's primary debt covenant of 4.25x.

During the June-end quarter, the company repurchased approximately 0.6 million shares for $48.4 million. As of Jun 30, 2024, it had $1.4 billion of stock-repurchase capacity remaining under its authorized buyback program.

Outlook

For 2024, CBRE projects its core EPS in the range of $4.70-$4.90, up from the previous guided range of $4.25-$4.65. The company expects approximately over 45% of its full-year core EPS to be achieved in the fourth quarter of 2024. The Zacks Consensus Estimate for the same is currently pegged at $4.48, which is below the guided range.

Currently, CBRE Group carries a Zacks Rank #3 (Hold).

Upcoming Releases

It's time to look forward to two stocks from the real estate operation industry, Jones Lang LaSalle Incorporated JLL and Kennedy-Wilson Holdings, Inc. KW. While Jones Lang LaSalle is slated to report quarterly numbers on Aug 6, Kennedy-Wilson Holdings is scheduled to come up with its figures on Aug 7.

The Zacks Consensus Estimate for Jones Lang LaSalle's second-quarter 2024 EPS stands at $2.27, which suggests a significant increase on a year-over-year basis. JLL currently carries a Zacks Rank of 3.

The Zacks Consensus Estimate for Kennedy-Wilson Holdings' second-quarter 2024 loss per share is pegged at 24 cents, which implies a substantial decrease year over year. KW currently carries a Zacks Rank of 2 (Buy).

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