Morningstar | CBRE Continues to Grow Despite Increasing Economic and Trade Tension Concerns
CBRE's management believes that its 2018 adjusted EPS will be near the high end of its $3.10-$3.20 guidance range, and it's currently discounting the effect of higher interest rates and trade tensions on its business. CBRE has continued to report strong results despite increasingly negative market sentiment. For the first nine months of 2018, revenue increased 15% to $15 billion while organic fee revenue growth was 12%. Adjusted earnings per diluted share also increased 16% to $2.06 for the nine months. We don't anticipate making a material change to our $46.50 fair value estimate for wide-moat CBRE, and we believe the shares are fairly valued.Many financial sector stocks have fallen in recent months as general fears over the state of the economic environment have been overpowering the positive results that companies have reported. On the effect of trade tensions, especially in Asia, CBRE noted that only approximately 2% of adjusted EBITDA comes from Asian markets that may be most affected. On a more cautious note, though, approximately 10% of the company's total revenue comes from its Asia-Pacific segment. Overall, any negative impact in Asia is manageable. Rising interest rates could slow property transaction volume, but capital markets produced 24% of the company's revenue in 2017, compared with 37% in 2006 before the previous downturn, so CBRE has a stronger base now of more stable revenue lines, such as leasing and property management.
Over the next year, CBRE has some strategic initiatives and may change how it deploys capital. The company is reorganizing into three global businesses from its current geographic segments, investment management, and development services. The company also has a new flexible space service, Hana, which partners with landlords; CBRE will put some capital into these partnerships. Management also seemed to be willing to use more capital for share repurchases at recent prices.
CBRE Group is a holding company. Through its subsidiaries, the company is a commercial real estate services and investment firm. The company's segments include: Advisory Services, which provides a range of services globally, including property leasing and capital markets; Global Workplace Solutions, which provides a suite of integrated, contractually-based outsourcing services globally for occupiers of real estate; and Real Estate Investments, which is comprised of investment management services provided globally, development services in the United States and United Kingdom and a service designed to help property occupiers and owners meet the demand for flexible office space solutions on a global basis.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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