CB Richard Ellis Group, Inc. (CBG) reported net income of $61.2 million or 19 cents per share in the second quarter of fiscal 2011 compared with $54.8 million or 17 cents per share in the year-ago period.
Excluding non-recurring items, the company reported net income of $67 million or 21 cents per share during the quarter versus $58.8 million or 18 cents per share in the year-earlier quarter. Recurring earnings, however, missed the Zacks Consensus Estimate by 3 cents.
We cover below the results of the recent earnings announcement, as well as the subsequent analyst estimate revisions and the Zacks ratings for the short and long-term outlook on the stock.
Second Quarter Review
The company reported total revenue of $1.4 billion in the second quarter, up 21% from $1.2 billion delivered in the year-earlier quarter. The better-than-expected result was primarily driven by improved performance across almost all geographic regions and business lines in the backdrop of steadily improving global market fundamentals.
Second quarter 2011 EBITDA (earnings before interest, tax, depreciation, and amortization) increased 3% to $166.1 million from $161.6 million in the year-ago quarter.
The gradual revival of the overall economy enabled the company to drive growth and management further expects to continue the momentum in 2011. We also remain encouraged by the recovering market conditions.
Earnings Estimate Revisions – Overview
Fiscal 2011 earnings estimates for CBG have moved in both directions since the earnings release, which implies that the analysts are cautious about the current fiscal performance of the company. Let’s dig into the earnings estimate in details.
Agreement of Estimate Revisions
For the upcoming quarter, 1 out of the 7 analysts covering the stock revised the estimates upward, while 2 analysts lowered the same in the last 30 days. For fiscal 2011, earnings estimates were decreased by 4 out of the 7 analysts covering the stock while none moved in the opposite direction over the last 30 days.This clearly indicates a negative bias for the fiscal year earnings.
Magnitude of Estimate Revisions
Earnings estimates for the upcoming quarter remained flat at 27 cents per share over the last 30 days. However, earnings estimates for fiscal 2011 decreased from $1.11 to $1.08 per share, which indicates that despite the gradual improvement in fundamentals estimates still remain challenged by broader economic trends.
Moving Forward
CB Richard is the global market leader in commercial real estate brokerage and advisory services for property leasing and sales, forecasting, valuations, origination and servicing of commercial mortgage loans, as well as project and real estate investment management.
The companyhas a broad range of real estate product and services and an extensive knowledge of domestic and international real estate markets that enables it to operate as a single-source provider of real estate solutions.
The company has a hard-to-replicate intellectual capital and technology resources that develop and deliver superior analytical, research and client service tools to its professionals, thereby enabling it to meet diverse client needs. This provides a competitive edge to the company over its rivals.
However, given its international presence, the company often faces unfavorable foreign currency movements, which in turn hurts its top-line growth. Any future slowdown in the global economy or the real estate industry as a whole will have an adverse impact on its leasing business, and would hamper its long-term growth potential.
CB Richard currently retains a Zacks #4 Rank, which translates into a short-term Sell rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Jones Lang LaSalle Inc. (JLL) also holds a Zacks #3 Rank.
