CBG Misses Q2 Earnings Estimates, Rev Up
CBRE Group Inc.’s (CBG) second-quarter 2013 adjusted earnings came in at 31 cents per share, missing the Zacks Consensus Estimate by 3 cents. A weaker yen and soft market conditions acted as the dampeners.
However, this was 15% higher than 27 cents earned in the prior-year quarter. The year-over-year increase is attributable to strong top-line growth across all operating regions and consistent improvements in global capital markets and occupier outsourcing businesses.
On a GAAP basis, this commercial real estate investment trust (:REIT) reported earnings of 21 cents per share, down from 23 cents in prior-year quarter.
Revenues came in at $1.7 billion, marginally surpassing the Zacks Consensus Estimate of $1,721 million. Additionally, revenues were up 9% from the prior-year quarter figure of $1,601 million.
Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) came in at $243.1 million, reflecting a year-over-year increase of 10% from $220.9 million in the prior-year quarter.
Behind the Headlines
Global leasing business revenue increased 4% amid weak market conditions, driven by notable gains in the Americas (up 5%) and EMEA (up 3%). However, the Asia Pacific region suffered a 1% dip in the leasing revenue affected by continued weakening of the yen against the dollar. Notably, the leasing business on a global platform is currently at a low due to the fragile economic environment and a higher level of occupier caution.
Moreover, Global Corporate Services (‘GCS’) – which is CBRE’s outsourcing business for occupier clients – remained strong with an 11% gain in revenues on year-over-year basis. CBRE inked 55 GCS contracts during the quarter, including 22 new-clients contracts. Among these, the new deal with J. C. Penney Company, Inc. (JCP) is noteworthy. Additionally, the quarterly contracts comprised the extension of 20 existing contracts, including those with AT&T, Inc. (T) and Citigroup, Inc. (C).
In addition, property, facilities and project management services revenues upped 11% on year-over-year basis, primarily driven by gains of 22% from the EMEA region. Furthermore, capital markets businesses were strong, with global property sales revenues rising 20% year over year, led by the Asia Pacific and the Americas.
Segment Details
Americas Region (U.S., Canada and Latin America): Revenues increased 10% year-over-year to $1.1 billion from $1.0 billion.
EMEA Region (primarily Europe): Buoyed by enhanced performances in France and the U.K., especially in property, facilities and project management business, revenues upped 9% year over year to $270.3 million.
Asia Pacific Region (Asia, Australia and New Zealand): Geographically, the region remained the best performer, with revenues of $233.1 million, up 16% from $201.2 million. The increase reflects enhanced overall performance, particularly in Australia, Greater China and Singapore.
Global Investment Management Business (investment management operations in the U.S., Europe and Asia): Revenues fell 4% year over year to $115.1 million from $119.7 million in prior year quarter.
Development Services (real estate development and investment activities primarily in the U.S.): Revenues declined 44% year-over-year to $9.9 million from $17.8 million, due to low rental revenues following the property sales. The development projects in process totaled $4.7 billion, up 12% from the end of 2012, and inventory of pipeline deals were $1.7 billion, down 19% from year-end 2012.
Liquidity
As of Jun 30, 2013, CBRE had cash and cash equivalents of $485.5 million, compared with $1.1 billion in at year-end 2012.
2013 Outlook
CBRE reaffirmed its adjusted earnings per share guidance it in the range of $1.40–$1.45 for full-year 2013.
Our Viewpoint
Although the weak market conditions and currency fluctuations remain the concerns, we believe that CBRE’s solid and flexible capital structure as well as its flourishing outsourcing and capital markets business strengthens its market position. Hence, backed by its solid operating model and strong revenue gains across all operating regions in the reported quarter, we expect the company to tide over the current stress market environment.
CBRE currently carries a Zacks Rank #3 (Hold).
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