Shares of CBRE Group Inc. CBG scaled a new 52-week high of $36.87 on Mar 23. The stock closed at $36.58, reflecting a return of 34.0% over the past one year. The trading volume for the session was nearly 1.8 million shares.
Rating upgrade and strategic acquisitions have aided CBRE Group in reaching a new 52-week high in terms of its stock price. But despite scaling such high, we believe that this commercial real estate services and investment firm can prove to be a good choice, given the improving market fundamentals, favorable rate environment and long-term growth expectation of 12.6%.
Growth Drivers
Delighting its shareholders, earlier this month, CBRE revealed the upgrade of its debt ratings to investment grade by Moody's Investors Service. Specifically, the company’s senior secured bank credit facility and senior unsecured ratings were upgraded to Baa3, with a stable outlook. The company’s conservative capital structure, solid financial policy and an uptick in contractual and recurring revenue sources primarily drove this rating upgrade.
The upgrade comes as a positive for CBRE, enhancing its creditworthiness in the market, and is likely to boost investors’ confidence in the stock. Specifically, rating upgrades give companies an opportunity to enjoy reduced costs on debts and better access to capital.
The company’s fourth-quarter 2014 adjusted earnings per share of 68 cents came a cent ahead of the year-ago quarter figure. The company also experienced an increase in revenues. Moreover, strategic buyouts have played a vital role in broadening CBRE’s geographic coverage as well as service offerings.
In sync with its efforts to strengthen the retail services offerings, CBRE had acquired a Dallas, TX-based commercial real estate firm, United Commercial Realty (UCR), in Jan 2014. This is the second regional retail real estate firm that CBRE purchased in the past 16 months, following the Fameco acquisition in Sep 2013.
Going forward, we believe that the company would benefit from strategic buyouts, improvement in leasing, property sales and outsourcing business.
Also, CBRE currently carries a Zacks Rank #2 (Buy).
Other Stocks Scaling Highs
Other real estate industry stocks that have scaled 52-week highs on Mar 23 include Jones Lang LaSalle Inc. JLL, Essex Property Trust Inc. ESS and Equity Residential EQR.
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