The shares of this real estate company were recently upgraded by Raymond James to ‘Outperform’ and seven analysts have raised their EPS estimates for the company in the past 30 days.
CBRE Group, Inc. (CBG)
From Barclays Capital Equity Research
CBRE Group, Inc. (CBG)’s fourth-quarter adjusted EPS of $0.99 (+6.6% Y/Y) was +$0.05 ahead of our estimate ($0.94) and +$0.07 ahead of consensus ($0.92); the result was also ahead of the implied 4Q17 guidance ($0.86-0.96). The Y/Y growth in adjusted EPS was driven by the flow through of positive fee revenue growth (+11%), most notably in occupier outsourcing and leasing (+20% and +17% Y/Y, respectively), offset in part by a -170bps Y/Y decline in adjusted EBITDA margin (difficult 4Q16 comp, decline in development services adjusted EBITDA). Investment sales was the notable weak spot in the fourth-quarter result (flat Y/Y), as both the Americas (-8%) and APAC saw declines. While this softness is not particularly worrisome to us given the inherent lumpiness in property sales, it was nevertheless a bit of a surprise given the strong 4Q17 result from peer JLL.
CBG provided its preliminary 2018 adjusted EPS guidance ($3.00-3.15), which implies +13.5% growth at the midpoint (vs. +17.7% in 2017); this is well ahead of our current estimate ($2.88), which is not yet updated to reflect 4Q17 results, and the consensus ($2.85). Embedded in guidance is the assumption of +8% growth from operations/EBITDA, as well as an incremental +5% from tax reform (CBG anticipates its overall tax rate going from 28% to 24-25% in 2018) and interest savings from an anticipated redemption of $800m of 5% notes in March. Pro-forma to exclude these non-operational items, which were not contemplated in our 2018 estimate, implied 2018 guidance would be $2.92+, which is still well ahead of our estimate and the consensus.
Longer-term, we continue to believe that CBG will benefit from its global scale and diversified revenue streams, and consequently remain constructive on the name.
Ross L. Smotrich, Barclays Capital Equity Research, www.barcap.com, 212-526-2306, February 8, 2018