CBRE Earnings: Outsourcing Solid, but Brokerage Business Hurt by Lower Transaction Volume

Narrow-moat-rated CBRE’s first-quarter results were largely in line with our expectations, as the outsourcing business remained solid but the brokerage business was affected by lower transaction volume. We think the pressure on the brokerage business will intensify this year, given our macroeconomic outlook and rising interest rates. The company reported core earnings per share of $0.92 in the first quarter, 7% higher than the FactSet consensus estimate of $0.86 and 31% lower in constant currency on a year-over-year basis. The shares were up around 9% after the company released results. CBRE maintained its earnings guidance for the full year, with core EPS expected to decline by low to mid-double digits this year. Management also said it expects adjusted earnings to recover sharply in 2024 and exceed the previous peak. We think the company’s guidance is a bit aggressive, since we expect the brokerage business to remain under pressure for a couple of years. We are maintaining our $90 fair value estimate after incorporating first-quarter results.