CBRE Group Inc. (CBG), the world’s largest commercial real estate services firm in terms of fiscal 2011 revenue, reported first quarter 2012 revenues of $1.35 billion compared with $1.19 billion in the year-earlier quarter, reflecting an increase of 14%. The revenues in the reported quarter marginally beat the Zacks Consensus Estimate by $2 million.
The company reported a net income of $27.0 million or 8 cents per share during the quarter, compared with $34.4 million or 11 cents in the year-ago period. Excluding non-recurring items, CBRE Group reported a net income of $45.9 million or 14 cents per share during the quarter, compared with $40.6 million or 13 cents in the year-earlier quarter. The first quarter 2012 recurring earnings marginally surpassed the Zacks Consensus Estimate by a penny.
First quarter 2012 EBITDA (earnings before interest, tax, depreciation and amortization) excluding selected charges increased 25% to $150.5 million, compared to $120.6 million in the year-ago quarter. The better-than-expected results in the seasonally weak first quarter were primarily due to an improved performance in the U.S., which accounted for approximately 60% of total revenues and nearly 70% of total recurring EBITDA.
CBRE Group witnessed robust global property sales and leasing activities during the quarter buoyed by its leading market position in the world’s major business centers. Global property sales revenue surged by double digits for the 10th consecutive quarter during first quarter 2012, as credit availability became easier and broad investor sentiment improved.
The company signed 58 long-term real estate outsourcing contracts during the quarter, out of which 21 were new clients. Global property leasing revenue also excelled with growth in the Americas region (U.S., Canada and Latin America) and Asia Pacific (Asia, Australia and New Zealand).
Geographically, revenue in the Americas increased 13% in first quarter 2012 to $845.3 million. In the Asia Pacific region, revenue rose 4% due to strong performance in India, Australia, and China. Revenues for the EMEA region (Europe, Middle East and Africa) declined to $197.4 million during the reported quarter, compared with $205.0 million in the first quarter of 2011 due to the continued weak economic growth in Europe.
The Global Investment Management segment, comprising investment management operations in the U.S., Europe and Asia, reported revenues of $125.2 million during the reported quarter compared with $50.3 million in the year-earlier quarter. The strong revenue growth was attributable to the ‘ING Real Estate Investment Management’ business that was acquired by CBRE Group in July and October 2011 and was fully integrated with its existing investment management business in first quarter 2012. Assets under management totaled $95.9 billion at quarter-end, up 2% from year-end 2011.
During the reported quarter, the Development Services segment which includes real estate development and investment activities primarily in the U.S., reported revenues of $14.9 million compared with $19.2 million in the year-ago quarter, primarily due to a dip in incentive fees and lower rental revenue. The development pipeline of the company totaled $4.8 billion at quarter-end.
The gradual revival of the overall economy, albeit at a tepid and inconsistent pace, has enabled the company to drive its growth engine. Management further expects to continue the growth momentum in 2012 with a diverse operating platform, premier brand, and a global footprint.
We also remain encouraged by indications of stabilization and recovery of market conditions. At year-end 2011, CBRE Group had cash and cash equivalents of $703.9 million compared to $1.1 billion at year-end 2011.
For full year 2012, the company reiterated its earlier recurring earnings guidance in the range of $1.20 to $1.25 per share. The stock presently has a Zacks #1 Rank that translates into a short-term Strong Buy rating. However, we have a Zacks #3 Rank (short-term Hold rating) for Jones Lang LaSalle Inc. (JLL), one of the competitors of CBRE Group.
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