Shares of CBRE Group CBRE have rallied 39.4% in the past six months, outperforming its industry’s growth of 13.1%.

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 2023 revenues). A healthy outsourcing business, strategic acquisitions and a solid balance sheet are expected to drive its performance.

Last week, CBRE announced that it had completed the combination of its project management business with Turner & Townsend. Since 2021, Turner & Townsend is a majority-owned subsidiary of CBRE.

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Factors Behind the Surge in CBRE Stock

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, which enables it to tide over market disruptions and other economic uncertainties. Third-quarter 2024 revenues were up 14.8% year over year to $9.04 billion, and this trend is expected to continue. Our estimate indicates the company’s total revenues to increase 11.3% and 10.3% year over year in 2024 and 2025, 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 18.8% to $2.65 billion in the third quarter. With first-generation outsourcing wins and existing contract expansions, this positive momentum is anticipated to continue. Our estimate indicates a year-over-year rise of 13.7% and 10.2% in 2024 and 2025, respectively, for the segment’s net revenues.

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 the first nine months of 2024, CBRE Group completed six in-fill business acquisitions, including two in the Advisory Services segment and four in the GWS segment, with an aggregate purchase price of approximately $295 million in cash and non-cash consideration. 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 billion in total liquidity as of Sept. 30, 2024. The company’s net leverage ratio was 1.26 as of the same date, significantly less than CBRE’s primary debt covenant of 4.25. With ample financial flexibility, CBRE is well-positioned to capitalize on growth opportunities. Its trailing 12-month return on equity is 13.91% compared with the industry’s average of 1.67%. This indicates that the company is more efficient in using shareholders’ funds than its peers.

In October, CBRE Group reported third-quarter 2024 core earnings per share (EPS) of $1.20, ahead of the Zacks Consensus Estimate of $1.06. The reported figure also increased 66.7% year over year. Results reflected double-digit revenue and segment operating profit growth, with significant operating leverage in Advisory Services, GWS and Real Estate Investments business segments. The company also expected a strong fourth quarter across all three segments and increased its 2024 core EPS outlook, fueling investors’ optimism on the CBRE stock.

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 still 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.

Also, analysts seem bullish on this Zacks Rank #2 (Buy) company, with the Zacks Consensus Estimate for CBRE Group’s 2024 EPS being revised marginally upward over the past month to $4.99.

Other Stocks to Consider

Some other top-ranked stocks from the operations real estate industry are Jones Lang JLL and Cushman & Wakefield CWK, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for JLL’s 2024 and 2025 EPS is pinned at $13.60 and $16.42, suggesting year-over-year growth of 83.8% and 20.7%, respectively.

The Zacks Consensus Estimate for CWK’s 2024 and 2025 EPS stands at 92 cents and $1.21,  indicating an increase of 9.5% and 32.2%, respectively, from the year-ago reported figure.

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