CBRE Group’s 4Q Results Beat Analysts’ Expectations; Shares Gain

CBRE Group’s shares surged 3.5% on Feb. 23 as the real estate company posted better-than-expected fourth-quarter results. The rise in commercial mortgage and investment management revenue along with strong US real estate development activity drove the earnings beat.

The strong showing came even as CBRE Group’s (CBRE) business grappled with constrained sales and leasing activity due to the pandemic. The company reported 4Q adjusted earnings of $1.45 per share, up 9.9% on a year-over-year basis, and beat the Street estimates of $0.94 per share. Revenues declined 2.9% to $6.91 billion but surpassed the consensus estimate of $6.33 billion.

The company’s commercial mortgage revenue surged 49% year-over-year, while investment management revenue rose 34%. Adjusted EBITDA came in at $753 million, up 9%. (See CBRE Group stock analysis on TipRanks)

CBRE Group CEO Bob Sulentic commented, “We’ve built our long-term plan on the assumption that office demand remains under pressure. Nevertheless, we still expect to achieve a minimum of low double-digit average annual adjusted earnings per share growth from this year through at least 2025, absent a recession, with meaningful upside potential from additional capital allocation.”

On Jan. 25, Goldman Sachs analyst Richard Skidmore initiated coverage on the stock with a Buy rating and a price target of $74 (5% downside potential). In a note to investors, the analyst said, “The CRE Broker sector is well positioned to benefit from a cyclical rebound in real estate leasing and transaction activity as the U.S. and global economies rebound in 2021 and 2022.”

Skidmore believes “CBRE is well positioned to outperform driven by its industry-leading scale and increased proportion of recurring revenue.”

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 2 analysts suggesting a Buy and 1 analyst suggesting a Hold. The average analyst price target of $70.67 implies more than 9% downside potential to current levels. Shares have increased 33.6% over the past three months.

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