Morningstar | CBRE Reports Impressive First-Quarter Results as Macroeconomic Concerns Fade; FVE Unchanged
CBRE started 2019 well, with fee revenue increasing 7% and adjusted EBITDA increasing nearly 30%. The results feature many of the same themes that emerged from first-quarter results of competitor JLL, with a buoyant leasing environment driving growth being offset slightly by weakness in capital markets. The healthy results underscore fading macroeconomic concerns that were particularly salient toward the end of 2018. Nevertheless, we continue to expect that the current economic upturn will eventually ebb and have accordingly built in a period of economic weakness in our forecast. With the first-quarter results largely in line with our expectations, we maintain our $49 fair value estimate for wide-moat CBRE.CBRE announced that it has concluded its search for a permanent CFO, meaning current CFO Jim Groch will transition to his new, permanent role as the company’s chief investment officer and hand off his CFO duties. New CFO Leah Stearns joins from American Tower Corporation, bringing her considerable experience in the role. Additionally, the company’s corporate restructuring seems to be progressing well, as evidenced by healthy margin expansion across the newly formed business lines. Advisory Services, which is the company’s largest segment, reported adjusted EBITDA growth of 22%.
Meanwhile, Global Workplace Solutions reported fee revenue growth of 12% and adjusted EBITDA growth of around 20%. This strength comes amid tailwinds deriving from an increased tendency by corporations to outsource their real estate operations and the growing inclination to consolidate providers. We think this dynamic is likely to continue playing out in the long term, driving significant growth for CBRE. Additionally, Moody’s decision to upgrade CBRE’s credit rating to Baa1 from Baa2 underscores management’s prudence in maintaining a conservative balance sheet given the strength of the current business cycle.
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.
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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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