CBRE (CBRE) announced solid earnings guidance on Thursday after capping a difficult year for commercial real estate with strong fourth-quarter results. CBRE stock soared, along with its major peers.
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CBRE earnings and outlook
On Thursday, the industry giant handily beat earnings and revenue estimates for the fourth quarter of 2023, according to FactSet.
CBRE's earnings rose 3.8% to $1.38 per share in the fourth quarter, its first increase after six consecutive quarters of declines. Despite sales increasing 4%, full-year EPS fell by one-third to $3.84.
The commercial real estate company expects revenue to rebound in 2024. EPS is expected to be between $4.25 and $4.65, with the midpoint above the FactSet consensus and suggesting mid-teens growth.
CBRE stocks, real estate stocks
Shares rose 8.5% on the stock market today, trading heavily at $94.30. CBRE stock gained a 94.27 buy point from a flat to flat base. It was the highest intraday price in 52 weeks.
Among other commercial real estate stocks, cushman & wakefield (CWK) rose 8.4% on Thursday. Cushman & Wakefield stock rose above its entry from a flat base at 11.05, according to MarketSmith pattern recognition.
jones lang lasalle (JLL) soared 8.9%. The stock price cleared an entry of 191.21.
Cushman & Wakefield and Jones Lang LaSalle are scheduled to report financial results later this month.
Commercial real estate giant confronts ruin
The commercial real estate brokerage industry is suffering from soaring interest rates. Even after the pandemic, many employees were hesitant to return to office work.
Now, a new threat is looming. Reports indicate that hundreds of billions of dollars in commercial real estate loans are coming due over the next few years, while commercial real estate values will continue to decline.
A change in strategy helped CBRE overcome this difficult situation.
Morningstar analyst Suryanshu Sharma said the company's business mix has gradually shifted over the past decade from transactional revenue to more recurring contract revenue.
The Global Workplace Solutions (GWS) segment demonstrates the pursuit of non-cyclical growth.
The GWS division provides facility management and project management for companies. The company continued to achieve double-digit sales and profit increases in the fourth quarter.
The Advisory segment includes CBRE's traditional brokerage services, including real estate sales and leasing, loan repayments, and mortgage origination. In the fourth quarter, we achieved flat profit growth, although revenue declined slightly.
CBRE CEO Bob Salentic said in Thursday's earnings call that growth in GWS and other “resilient businesses” is contributing to the company's “market growth in businesses that are sensitive to interest rates and the availability of debt.” It helped the company survive the “reduction in revenue caused by the company''.
In 2023, resilient businesses will account for 60% of total operating income, up from 32% in 2011. However, their operating profit margins are lower than the company's advisory business.
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