Earnings Snapshot: Brokerage Giants Report Strong Q2 Revenue Growth
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As Cushman & Wakefield's initial public offering debuted on the New York Stock Exchange, commercial real estate brokerages CBRE Group and Newmark Group reported double-digit second-quarter earnings growth Thursday. Colliers International, which also had double-digit growth that beat analyst expectations, reported earnings Tuesday.
The firms have been benefiting from the diversification of their business lines.
Commercial real estate brokerages are becoming more institutionalized with each passing year. What was once considered a very niche, family-operated segment in the industry has attracted the attention of deep-pocketed, institutional investors, private equity giants and sovereign wealth funds looking for brokerages to provide real estate services. The public real estate service firms are seeing higher commissions and property management fees as a result, leading to double-digit revenue growth on a quarterly basis.
Below is a quick snapshot of each company’s Q2 performance.
CBRE Group Inc. (CBRE)
Stock price as of Aug. 2: $49.32
% Change: -1.08%
CBRE Group reported double-digit earnings and revenue growth in the second quarter, which CEO Bob Sulentic attributed to the strength of the company’s diverse business lines, including its leasing, occupier outsourcing and development services.
The Los Angeles-based firm, one of the largest commercial real estate brokerage and services firms in the world, reported net income of $228.7M, up 13%. Revenue totaled $5.1B for the quarter, up 13% from Q2 2017.
CBRE’s occupier outsourcing business in particular performed well in Q2, generating 15% in revenue growth; property sales were up 2% globally and the firm’s property management business generated 6% in fee revenue growth.
CBRE’s performance exceeded Zacks Equity Research analyst expectations, and the company raised its full-year earnings guidance as a result, from a range of $3 to $3.15/share to a range of $3.10 to $3.20/share.
“We begin the second half of the year with positive momentum across our business,” Sulentic said in a statement. “The macro environment remains favorable with solid economic growth. While we are mindful of potential risks on the horizon, particularly from heightened trade tensions, we have thus far seen no discernible impact on our business.”
Newmark Group (NMRK)
Stock price as of Aug. 2: $13.35
% Change: -3.47%
Newmark Group had a strong second quarter in terms of revenue growth. The commercial services firm, which includes leading brokerage Newmark Knight Frank, reported 15% growth on revenue of $466.6M. Earnings for the quarter came in at $739K, according to the Associated Press.
The New York-based firm has been struggling to bounce back from an underwhelming IPO launch in December. The firm’s shares have dropped 16% since the beginning of the year, though Zacks analysts detected a pattern in its trading charts that could suggest the stock has found its low point and signal a turnaround for the brokerage.
“We once again generated strong top-line growth from leasing, valuation and advisory and GCS (Global Corporate Services),” Newmark Group CEO Barry Gosin said in a statement. “We believe that we gained further market share in investment sales during the quarter, as our revenue growth outpaced comparable industry metrics.”
Colliers International Group Inc. (CIGI)
Stock price as of Aug. 2: $81.35
% Change: -0.61%
Colliers International reported double-digit revenue growth in the second quarter as well, beating analyst estimates. Revenue increased 14% to $667.4M in Q2 compared to the same period a year ago. Earnings came in at $45.6M, up from the $41.2M reported in Q2 2017.
The company attributed its strong performance to a combination of acquisitions and internal growth. Colliers acquired three firms to expand its presence in North America, not including its 75% stake in Chicago-based real estate investment firm Harrison Street Real Estate, which manages $15.6B worth of assets globally in the healthcare, education and self-storage sectors in particular.
“Based on results to date, current business pipelines and acquisitions completed subsequent to the quarter end, we remain optimistic about our growth prospects for the balance of the year,” Colliers Chairman and CEO Jay S. Hennick said in a statement.
Colliers' share price has increased 34.3% since the beginning of the year, outpacing the S&P 500.