Shares of CBRE Group (CBRE – Free Report) have rallied 8.6% in the past six months, outperforming its industry’s decline of 1.5%.
With a wide array of real estate products and services offerings, CBRE enjoys a robust scale and is the largest commercial real estate services and investment firm (based on 2024 revenues). A healthy outsourcing business, strategic acquisitions and a solid balance sheet are expected to drive its performance.
This Zacks Rank #3 (Hold) company has modified its segments and will now report four business segments beginning in 2025. This includes Advisory Services (excluding property management), Building Operations & Experience (comprised of facilities management and property management), Project Management and Real Estate Investments.
Image Source: Zacks Investment Research
Let us decipher the possible factors behind the surge in the stock price.
Over the past few years, CBRE has opted for a better-balanced and more resilient business model. It has shifted toward a more diversified and contractual revenue base. This enables it to tide over market disruptions and other economic uncertainties. Fourth-quarter 2024 revenues were up 16.2% year over year to $10.4 billion, and this trend is expected to continue. Our estimate indicates the company’s total revenues to increase 9.4% and 8.8% year over year in 2025 and 2026, respectively.
Moreover, with occupiers of real estate increasingly opting for outsourcing and relying on the expertise of third-party real estate specialists to optimize their operations, CBRE Group’s Global Workplace Solutions (“GWS”) segment has been benefiting. The GWS segment delivered year-over-year net revenue growth of 18.5% in the fourth quarter of 2024.
The company’s solid technology platform helps it to develop and deliver superior analytical, research and client service tools to meet diverse client needs. In fact, strategic reinvestment in its business, specifically on the technology front, is expected to differentiate CBRE Group from its peers. The company has been spending millions, besides opting for the acquisition of technology solution providers in the commercial real estate market.
CBRE Group has been focusing on strategic in-fill acquisitions by acquiring regional or specialty firms and independent affiliates as part of its efforts to widen its global reach and expand and reinforce its service offerings. In 2024, the company completed nine in-fill business acquisitions for approximately $315 million in cash and non-cash consideration. These comprised three in the Advisory Services segment and six in the GWS segment. Such opportunistic acquisitions and strategic investments are likely to serve as growth drivers, supplementing its organic growth.
CBRE Group is also focused on maintaining a solid balance sheet and ample liquidity. It had $4.4 billion in total liquidity as of Dec. 31, 2024. The company’s net leverage ratio was 0.93X as of the same date, significantly less than CBRE’s primary debt covenant of 4.25X. With ample financial flexibility, it is well-positioned to capitalize on growth opportunities. Its trailing 12-month return on equity is 16.96% compared with the industry’s average of 3.87%. This indicates that the company is more efficient in using shareholders’ funds than its peers.
Will the Trend Last?
CBRE Group is well-poised to gain from its wide range of real estate products and services. The company has opted for a better-balanced and more resilient business model in the past years and continues to gain from its diversification efforts. The outsourcing business remains healthy and its pipeline is likely to remain elevated, offering it scope for growth. Strategic buyouts and technology investments are expected to drive its performance.
Though credit-market conditions have been affected amid elevated interest rates, a volatile environment, and geopolitical unrest, and investors adopted a cautious approach, delaying the closing timeline for transactions, things are now turning around in the commercial real estate sector. CBRE, with its wide offering, is well poised to benefit from this environment.
With the above-mentioned factors, we believe the rising trend in the stock is expected to continue in the near term.
Stocks to Consider
Some better ranked stocks from the operations real estate industry are Newmark (NMRK – Free Report) and Mobile Infrastructure Corporation (BEEP – Free Report) , each carrying a Zacks Rank of #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for NMRK’s 2025 earnings per share is pinned at $1.45, suggesting year-over-year growth of 17.9%.
The Zacks Consensus Estimate for BEEP’s ongoing year’s earnings per share stands at negative 30 cents, indicating a 25% decrease from the year-ago reported figure.
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