CBRE Group (CBRE) to Post Q2 Earnings: What’s in the Cards?

CBRE Group, Inc. CBRE is slated to report second-quarter 2018 results on Aug 2, before the market opens. The company is anticipated to have recorded year-over-year growth in both revenues and earnings.

In the last reported quarter, this Los Angeles, CA-based commercial real estate services and investment firm delivered a 10.2% positive earnings surprise. Results indicate strong revenue growth across all three of its global regions. Specifically, the company experienced impressive growth in global occupier outsourcing, capital markets and the Asia-Pacific segment business.

In fact, CBRE has a decent record of earnings surprise, having surpassed estimates in each of the trailing four quarters, coming up with an average positive beat of 14.5%. The graph below depicts this surprise history:

Let’s see how things are shaping up for this announcement.

Factors to Consider

CBRE Group has a broad range of real estate products and services, and an extensive knowledge of domestic and international real estate markets. As the largest commercial real estate services and investment firm (based on 2017 revenues), the company enjoys a robust scale. It is among the few companies offering a full suite of services to multinational clients. Moreover, the company has grown organically and banked on strategic in-fill acquisitions to boost its service offerings and geographic reach.

Also, strategic reinvestment in the company’s business, specifically on the technology front, is expected to differentiate CBRE Group from its peers. Therefore, the company’s market leading position is likely to give it a competitive edge in capitalizing on the commercial real estate industry tailwinds in the second quarter.

Moreover, the company has opted for a better-balanced and more resilient business model, and in pursuit of this, shifted the revenue mix toward more contractual sources and leasing. Contractual revenues and leasing, largely recurring over time, constituted 74% of total fee revenues in 2017 compared with 61% in 2006. This trend is expected to have continued into the second quarter as well.

Further, occupiers of real estate are increasingly opting for outsourcing and depending on the expertise of third-party real estate specialists to achieve improvement in execution and efficiency. With a market-leading position and being one of the few companies boasting occupier outsourcing capabilities on a global scale, CBRE Group remains well poised to capitalize on the favorable trends in the June-end quarter.

Amid these, the Zacks Consensus Estimate for second-quarter revenues is currently pegged at $4.7 billion, indicating projected growth of nearly 40.9% year over year. In addition, the Zacks Consensus Estimate for second-quarter earnings is 72 cents, reflecting estimated growth of around 10.8% year over year. Notably, the earnings estimate was marginally revised upward over the last 60 days.

However, hiring efforts, strategic investments and shift toward a comparatively lower-margin outsourcing business might strain the company’s margin. Also, after years of decent growth, commercial real estate transaction volumes have been declining. This could affect the company’s property sales business revenues.

Earnings Whispers

Our proven model does not conclusively show that CBRE Group is likely to beat earnings estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a bullish Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here, as you will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: CBRE Group has an Earnings ESP of 0.00%.

Zacks Rank: CBRE Group’s Zacks Rank of 3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings beat this season.

Stocks That Warrant a Look

Here are a few stocks in the broader real estate sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this time around:

Invitation Homes Inc. INVH, slated to release quarterly numbers on Aug 9, has an Earnings ESP of +0.50% and a Zacks Rank #3.

Medical Properties Trust, Inc. MPW, set to report earnings on Aug 2, has an Earnings ESP of +0.31% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

National Health Investors, Inc. NHI, scheduled to report quarterly numbers on Aug 7, has an Earnings ESP of +0.15% and carries a Zacks Rank of 2.

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