CBRE Group Inc.’s CBRE fourth-quarter 2022 core earnings per share (EPS) of $1.33 surpassed the Zacks Consensus Estimate of $1.19. Quarterly revenues of $8.19 billion also compared favorably with the Zacks Consensus Estimate of $8.13 billion. Shares of CBRE are slightly up so far.
However, on a year-over-year basis, the core EPS declined by 26.0%, while revenues fell 4.2%. Despite the challenging macro environment, CBRE benefited from the expansion of its resilient business in recent years.
Per Bob Sulentic, CBRE’s president and chief executive officer, “Although core earnings declined significantly in the fourth quarter, they slightly exceeded the estimate we provided last quarter. This outcome was driven by better-than-expected growth in several of the more cyclically resilient elements of our business like outsourcing and others that are secularly favored like project management and the logistics asset class – offset by a slightly larger-than-expected decline in transactional revenue.”
Net revenues decreased 10.6% (5.8% in local currency) year over year to $4.98 billion. Core EBITDA declined 30.1% (25.7% in local currency) to $668 million.
In the fourth quarter of 2022, CBRE completed two in-fill acquisitions for a total of $114 million in cash and deferred consideration.
For the full-year 2022, the core EPS came in at $5.69, higher than the prior-year tally of $5.33 and also surpassed the Zacks Consensus Estimate of $5.54. This was backed by 11.1% growth in revenues to $30.8 billion.
For 2023, though CBRE expects the core EPS to decline by the low-to-mid-double digits, it still expects the figure to be the third-highest in its history.
Quarter in Detail
CBRE Group’s Advisory Services segment reported a year-over-year revenue decrease of 21.3% (17.4% in local currency) to $2.6 billion. Global leasing revenues fell 7% (3% in local currency), reflecting declines across all major property types, except retail. This decrease was driven by the Americas, where revenues fell 7% (same in local currency). Moreover, foreign currency headwinds shrouded growth in overseas markets.
Global sales revenues fell 47% (44% in local currency) amid a much-constrained capital environment and difficult comparisons with the fourth quarter of 2021. There was broad-based weakness in investment activity. Global sales revenues declined noticeably across all major property types.
Global mortgage origination revenues declined 42% (41% in local currency) as most debt capital sources remained on the sidelines throughout the quarter. Reflecting lower prepayment fees, loan servicing revenues fell 19% (18% in local currency).
The Global Workplace Solutions (“GWS”) segment registered a year-over-year increase of 9.8% (15.9% in local currency) in revenues to $5.29 billion. Excluding revenues from Turner & Townsend (60% interest acquired on Nov 1, 2021), GWS revenues increased 7% (13% in local currency).
Project management net revenue growth was strong even before the Turner & Townsend contributions, while the Facilities management net revenue increase was aided by significant growth from technology and healthcare clients. CBRE experienced an increase in the GWS new business pipeline, backed by a diversified mix of prospects in the financial and professional services, industrial and technology sectors.
The Real Estate Investments segment experienced a decline of 29.6% (23.4% in local currency) in revenues. In Real Estate Development business, the operating loss aggregated $6 million compared to a $122 million profit in the year-ago period. Steep lower U.S. asset dispositions as opposed to the last year’s strong fourth quarter, as well as losses on development activities in the U.K. and Continental Europe, led to this performance.
At the end of the fourth quarter of 2022, assets under management increased by $5.4 billion from the third quarter of 2022 to $149.3 billion. This was driven by net inflows of capital and a positive currency movement.
Balance Sheet Position
CBRE Group exited 2022 with cash and cash equivalents of $1.3 billion, down from $2.4 billion as of Dec 31, 2021.
As of Dec 31, 2022, the company had $4.8 billion in total liquidity. This comprised $1.3 billion in cash in addition to the ability to borrow a total of $3.5 billion under its revolving credit facilities, net of any outstanding letters of credit. The company’s net leverage ratio was 0.14 as of the same date, significantly less than CBRE’s primary debt covenant of 4.25X.
During the December-end quarter, the company repurchased 6.1 million shares at an average price of $73.84, spending around $451 million. As of Dec 31, 2022, it had $2.1 billion of stock-repurchase capacity remaining under its authorized buyback program.
Currently, CBRE Group carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CBRE Group, Inc. Price, Consensus and EPS Surprise
CBRE Group, Inc. price-consensus-eps-surprise-chart | CBRE Group, Inc. Quote
It’s time to look forward to two stocks from the real estate operation industry — Jones Lang LaSalle Incorporated JLL and eXp World Holdings, Inc. EXPI. Both Jones Lang LaSalle and eXp World Holdings are slated to report quarterly numbers on Feb 28.
The Zacks Consensus Estimate for Jones Lang LaSalle’s fourth-quarter 2022 EPS stands at $4.47, suggesting a year-over-year decrease of nearly 48.4%. JLL currently carries a Zacks Rank of 5 (Sell).
For eXp World Holdings, the Zacks Consensus Estimate is currently pegged at a loss of 3 cents per share. EXPI currently carries a Zacks Rank of 3 (Hold).
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