CB Richard Ellis Group Inc. (CBG), the world’s largest commercial real estate services company (on the basis of 2010 revenues), has reported first quarter 2011 revenues of $1.2 billion compared with $1.0 billion in the year-earlier quarter, reflecting an increase of 16%. The strong quarterly revenues marked a solid start to fiscal 2011 as first quarter has been historically the seasonally weakest quarter for the company. Total revenues in the reported quarter were in line with the Zacks Consensus Estimate.
The company reported a net income of $34.4 million or 11 cents per share during the quarter, compared with a net loss of $6.6 million or 2 cents in the year-ago period. Excluding non-recurring items, CB Richard Ellis reported a net income of $40.6 million or 13 cents per share during the quarter compared with $3.2 million or 1 cent in the year-earlier quarter. The first quarter 2011 recurring earnings marginally beat the Zacks Consensus Estimate by a penny.
First quarter 2011 EBITDA (earnings before interest, tax, depreciation, and amortization) increased 51% to $113.0 million, compared to $75.0 million in the year-ago quarter. The better-than-expected results were primarily due to improved performance across almost all geographic regions and business lines against a backdrop of steadily improving global market fundamentals.
CB Richard Ellis witnessed robust global property sales and leasing activities during the quarter buoyed by its leading market position in the world’s major business centers. Global property sales revenue surged 34% year-over-year during first quarter 2011, as credit availability became easier and broad investor sentiment improved. CB Richard Ellis signed 44 long-term real estate outsourcing contracts (including 13 new clients) during the quarter, with a special emphasis on health care and government institutions. Global leasing revenue increased 8% during the quarter, while outsourcing revenue increased 14% – the best year-over-year growth rate for this business line since the third quarter of 2008.
Geographically, revenue growth during the quarter was led by the Asia Pacific region. Revenue in the Asia Pacific region rose 19% powered by strong increases in India, Japan, Singapore and China. Revenue in the Americas – the largest business segment of the company, increased 16% driven by robust growth in all business lines. Revenues for the EMEA (Europe, Middle East and Africa) region grew by 9% year-over-year due to healthy outsourcing gains, partially offset by slower property sales and leasing activity primarily in the U.K.
The Global Investment Management segment, comprising investment management operations in the U.S., Europe and Asia, reported revenues of $50.3 million during the quarter compared with $39.4 million in the year-earlier quarter driven by higher asset management and acquisition fees. Assets under management totaled $37.9 billion at the end of the quarter, up 14% from first quarter 2010. During the quarter, Development Services segment, that includes real estate development and investment activities primarily in the U.S., reported revenues of $19.2 million compared with $18.3 million in the year-ago quarter. The development pipeline of the company totaled $4.9 billion, up $0.2 billion from first quarter 2010.
At quarter-end, CB Richard Ellis had cash and cash equivalents of $427.6 million. The gradual revival of the overall economy has enabled the company to drive its growth engine and management further expects to continue the momentum in 2011 as well. We also remain encouraged by indications of stabilization and recovery of market conditions.
We maintain our ‘Outperform’ rating on CB Richard Ellis, which presently has a Zacks #2 Rank translating into a short-term ‘Buy’ recommendation and indicates that the stock is expected to perform well above the overall U.S. equity market for the next 1?3 months. We also have an ‘Outperform’ rating and a Zacks #1 Rank (short-term ‘Strong Buy’) for NorthStar Realty Finance Corp. (NRF), one of the peers of CB Richard Ellis.
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