Higher Interest Rates and a Slowing Economy Weigh on CBRE’s Q3 Results; Reducing FVE to $90

Narrow-moat-rated CBRE posted underwhelming third-quarter results, as rising interest rates and a slowing economy weighed on the company’s brokerage business. The company reported core EPS of $1.13 per share in the third quarter, below the FactSet consensus estimate of $1.26 per share. The core EPS was 19% lower on a year-over-year basis. The companywide net revenue was reported at $4.6 billion in the current quarter, an 11% increase compared with the same quarter of last year. Core EBITDA came in at $606 million, which is about 17% lower compared with the previous year because of the inherent operating leverage in the company’s business. Most of the decline in core EBITDA came from the advisory business of the company. We are reducing our fair value estimate to $90 per share from $94 per share after incorporating third-quarter results because of subdued near-term margin and growth expectations.