CBRE reports 9.2% increase in Q4 revenue, despite challenges in real estate market

CBRE Group, Inc. has released its financial results for the fourth quarter and full year 2023, showing growth in certain areas despite challenges in the commercial real estate market.

According to the press release, CBRE reported a 9.2% increase in revenue for the fourth quarter of 2023, amounting to $8.95 billion, compared to $8.194 billion in the fourth quarter of 2022. For the full year 2023, revenue reached $31.949 billion, up 3.6% from $30.828 billion in 2022.

The company's net revenue increased to $5.187 billion in the fourth quarter of 2023, a 4.3% rise from $4.975 billion in the same period of 2022. However, for the full year 2023, net revenue decreased by 2.7% to $18.276 billion from $18.777 billion in 2022.

CBRE reported a significant improvement in its GAAP net income, which rose to $477 million in the fourth quarter of 2023, a substantial increase from $81 million in the fourth quarter of 2022. However, full-year GAAP net income declined to $986 million in 2023 from $1.407 billion in 2022.

Bob Sulentic, CBRE's Chair and CEO, commented on the results, saying, "We ended 2023 on a high note with fourth quarter year-over-year operating profit growth across all three of our business segments." Despite the challenges faced by commercial real estate in 2023, Sulentic noted that the company delivered the third-highest full-year earnings in CBRE's history, with resilient businesses offsetting market-driven revenue declines in certain sectors.

Looking ahead, CBRE expects to achieve core earnings-per-share of $4.25 to $4.65 in 2024, implying mid-teens percentage growth at the midpoint of the range.

In terms of segment performance, the Advisory Services segment saw a decline in revenue, while the Global Workplace Solutions (GWS) segment reported a 15.3% increase in revenue. The Real Estate Investments (REI) segment experienced a 9.9% decrease in revenue.

The company's shares have moved 8.5%, and are now trading at a price of $94.3.

The company's full 8-K submission is available here.

2018 2019 2020 2021 2022 2023
Revenue (M) $21,340 $23,894 $23,826 $27,746 $30,828 $31,194
Interest Income (M) $107 -$86 -$68 -$50 -$69 -$127
Operating Margins 5% 5% 4% 6% 5% 3%
Net Margins 5% 5% 3% 7% 5% 2%
Net Income (M) $1,063 $1,282 $752 $1,837 $1,407 $590
Depreciation & Amort. (M) $452 $439 $502 $526 $613 $625
Diluted Shares (M) 343 340 339 340 328 312
Earnings Per Share $3.1 $3.77 $2.22 $5.41 $4.29 $1.89
EPS Growth n/a 21.61% -41.11% 143.69% -20.7% -55.94%
Avg. Price $45.48 $51.21 $50.12 $88.08 $88.46 $94.96
P/E Ratio 14.53 13.41 22.37 16.07 20.29 49.2
Free Cash Flow (M) $903 $930 $1,564 $2,154 $1,369 $142
EV / EBITDA 11.82 11.62 11.99 13.86 14.04 20.15
Total Debt (M) $3,535 $3,522 $2,760 $2,848 $1,754 $1,672
Net Debt / EBITDA 1.79 1.5 0.59 0.19 0.21 0.28
Current Ratio 1.16 1.17 1.24 1.2 1.03 1.19

The stock is likely overvalued at a price of $94.3 per share due to an inflated PEG ratio.

In terms of growth factors, the company's revenues are rapidly growing at a rate of 6.6%. However, CBRE's capital expenditure trend is flat, with a growth rate of 2.7% over the last 5 years. Additionally, the operating margins have averaged out to 4.7% over the last 6 years, significantly lower than the Real Estate Development industry average of 18.64%. Furthermore, the earnings per share have declined over the last 6 years, with an annualized growth rate of -7.9%.

Regarding value factors, CBRE has just enough current assets to cover its current liabilities, with a current ratio of 1.19. However, the firm is trading above its fair value at its current price of $94.3, with a P/E ratio of 49.6 and a P/B ratio of 3.65. The firm's free cash flows have a decent average of $1.18 Billion over the last 5 years, but with a compounded average growth rate of -31.1% and a year-on-year growth variability coefficient of 2165.78%. Additionally, CBRE's P/E ratio of 49.6 is higher than the Finance sector average of 12.38, but its expected earnings of $4.34 per share indicates a lower forward P/E ratio of 21.7, suggesting that its shares are trading at a premium considering its historical average P/E ratio of 22.13.

Please note that this analysis is not personalized financial advice.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.