2 Surging Real Estate Services Stocks with More Room to Run Historically low mortgage rates and remote lifestyles sparked a home-buying frenzy last year. Furthermore, as companies continue to operate with hybrid working arrangements, the real estate services industry should continue...
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Historically low mortgage rates and remote lifestyles sparked a home-buying frenzy last year. Furthermore, as companies continue to operate with hybrid working arrangements, the real estate services industry should continue to witness strong demand. So, we think it could be worth betting on real estate services stocks CBRE Group (CBRE) and Jones LaSalle (JLL). These stocks have delivered significant returns over the past year and still have plenty of upside to deliver. Read on.
The housing market was red hot in 2021. According to the NAR's chief economist Lawrence Yun, sales likely climbed owing to a strengthening job market and worries among potential buyers that mortgage rates will be considerably higher in 2022.
According to Realtor.com, home sales are predicted to climb by 6.6%, while home prices are expected to rise by 2.9% in 2022. Though a steady rise in mortgage rates will make affordability a primary priority for home buyers, the rising demand should drive the market at a fast pace as builders ramp up output.
Shares of real estate services stocks CBRE Group Inc. (CBRE) and Jones Lang LaSalle Incorporated (JLL) have surged in price over the past year and we think are well-positioned to maintain their momentum in the coming months.
CBRE Group Inc. (CBRE)
Los Angeles-based CBRE is a global commercial real estate service and investment company. It provides an integrated suite of services to a wide range of clients, including facilities, transaction, and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services; and development services.
In November, CBRE and Turner & Townsend Holdings Limited completed a partnership transaction in which CBRE acquired a 60% ownership stake and entered a strategic partnership with Turner & Townsend.
For the third quarter, ended Sept. 30, 2021, CBRE's revenue increased 20.4% year-over-year to $6.79 billion. Its operating income grew 93.8% from its year-ago value to $409.67 million. The company's net income increased 136.6%year-over-year to $435.74 million, while its EPS surged 132.7% from the prior-year quarter to $1.28 over this period.
CBRE is expected to generate 61.8%revenue growth in its fiscal 2021. In addition, its EPS is estimated to increase 6.6% year-over-year to $5.64 in fiscal 2022. CBRE's stock has gained 74.4% in price over the past year and 24.5% over the past six months.
CBRE's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
CBRE is also rated A for Growth and B for Momentum. Within the D-rated Real Estate Services industry, it is ranked #8 of 45 stocks. To see additional POWR Ratings for Stability, Sentiment, Quality, and Value for CBRE, click here.
Jones Lang LaSalle Incorporated (JLL)
JLL in Chicago isa professional services firm that offers real estate and investment management services in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company also provides investment management services to institutional and retail customers and high-net-worth individuals.
This month, JLL acquired Hank, a virtual engineering platform that is driven by artificial intelligence (AI) that automatically optimizes commercial building management systems to offer better comfort, air quality, and energy savings. JLL's acquisition of Hank demonstrates the company's ongoing commitment to driving sustainability and embracing technology to shape the future of real estate.
During the third quarter, ended Sept. 30, 2021, JLL's revenue increased 22.9% year-over-year to $4.89 billion. Its operating income increased 89.1% from its year-ago value to $292.9 million. The company's net income increased 79.8% year-over-year to $237.2 million, while its EPS grew 81.3% from the prior-year quarter to $4.57.
JLL is expected to witness 27.2% revenue growth in fiscal 2021. Its EPS is estimated to increase 82.5% year-over-year to $17.26 in its current fiscal year. Over the past year, JLL's stock has gained 74.7% in price. Furthermore, it has gained 42% over the past nine months.
JLL's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. JLL has a B grade for Growth, Momentum, and Quality. In the Real Estate Services industry, it is ranked #2.
In total, we rate JLL on eight distinct levels. Beyond what we have stated above, we have also given JLL grades for Stability, Value, and Sentiment. Get all the JLL ratings here.
CBRE shares were unchanged in premarket trading Friday. Year-to-date, CBRE has declined -2.58%, versus a -1.75% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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