Sundry Photography/iStock Editorial via Getty Images
CBRE Group (NYSE:CBRE) has revised its 2023 core earnings outlook due to the impact of increasing interest rates on the real estate capital markets. While Q3 core earnings per share (EPS) exceeded expectations, they declined compared to the previous quarter and the same period last year. This decline can be attributed to a slowdown in property sales and debt financing activity.
CBRE President and CEO, Bob Sulentic, explained, “This decline was exacerbated by delays in harvesting development assets which we will sell when market conditions improve.”
The company now expects 2023 core EPS to decrease by approximately 30%, compared to the previous guidance of a 20-25% decline. However, Sulentic is optimistic, stating that “the company believes 2023 will be the trough for earnings.”
In Q3, core EPS came in at $0.72, surpassing the consensus estimate of $0.67. However, this represented a decrease from $0.82 in Q2 and $1.13 in the same quarter last year. Revenue for the quarter was $7.87 billion, beating the consensus estimate of $7.42 billion and showing growth from $7.72 billion in Q2 and $7.53 billion in the previous year.
As a result of this news, shares of CBRE, a commercial real estate services and investment company, dipped 1.6% in Friday morning trading. Total costs and expenses for the quarter were $7.60 billion, up from $7.42 billion in Q2 and $7.16 billion in the previous year. Core EBITDA declined to $436 million from $504 million in Q2 and $606 million in Q3 of the previous year. On the positive side, free cash flow improved to $306 million compared to -$86 million in Q2 and $690 million in Q3 2022.
During the quarter, CBRE also repurchased approximately 6.2 million shares for $516 million, at an average price of $83.03 per share.
In summary, despite the reduction in outlook, CBRE remains confident that 2023 will mark the low point for earnings, and they are actively taking steps to improve their performance in the real estate capital market.
Increase in Interest Rates Leads to Lower Earnings for CBRE Group
CBRE Group (NYSE:CBRE) has adjusted its forecast for core earnings in 2023 due to the impact of rising interest rates on the real estate capital market. Although the company reported higher than expected Q3 core earnings per share (EPS), there was a decline in comparison to the previous quarter and the same period last year. This decline was primarily influenced by a slowdown in property sales and debt financing activity.
The company’s President and CEO, Bob Sulentic, explained that the decline was further compounded by delays in selling development assets, which will be sold when market conditions improve. As a result, CBRE now expects a decline of approximately 30% in core EPS for 2023, compared to the previous guidance of a 20-25% decline. However, Sulentic expressed optimism, stating that the company believes 2023 will be the bottom point for earnings.
In the third quarter, CBRE reported core EPS of $0.72, exceeding the consensus estimate of $0.67. Nevertheless, this figure represented a decrease from $0.82 in the second quarter and $1.13 in the same period the previous year. Revenue for the quarter was $7.87 billion, surpassing the consensus estimate of $7.42 billion and reflecting growth from $7.72 billion in the second quarter and $7.53 billion in the corresponding period last year.
The news of the revised earnings outlook led to a 1.6% decline in CBRE’s stock in Friday morning trading. The company’s total costs and expenses for the quarter were $7.60 billion, up from $7.42 billion in the second quarter and $7.16 billion in the previous year. Core EBITDA declined to $436 million from $504 million in the second quarter and $606 million in the third quarter of the prior year. On a positive note, free cash flow improved to $306 million compared to -$86 million in the second quarter and $690 million in the third quarter of 2022.
During the quarter, CBRE repurchased approximately 6.2 million shares for $516 million, at an average price of $83.03 per share. Despite the challenges, CBRE remains confident that 2023 will be the turning point for earnings and is actively working to enhance its performance in the real estate capital market.
