CBRE (CBRE)

Commercial real estate firm CBRE (NYSE:CBRE) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 13.5% year on year to $10.26 billion. Its non-GAAP profit of $1.61 per share was 10.2% above analysts’ consensus estimates.

Company Overview

Established in 1906, CBRE (NYSE:CBRE) is one of the largest commercial real estate services firms in the world.

Technology has been a double-edged sword in real estate services. On the one hand, internet listings are effective at disseminating information far and wide, casting a wide net for buyers and sellers to increase the chances of transactions. On the other hand, digitization in the real estate market could potentially disintermediate key players like agents who use information asymmetries to their advantage.

CBRE’s primary competitors include Jones Lang LaSalle (NYSE:JLL), Cushman & Wakefield (NYSE:CWK), Colliers International (NASDAQ:CIGI), and BGC Partners (NASDAQ:BGCP).

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, CBRE grew its sales at a 10.3% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the consumer discretionary sector, which enjoys a number of secular tailwinds.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. CBRE’s annualized revenue growth of 12.3% over the last two years is above its five-year trend, but we were still disappointed by the results.

We can dig further into the company’s revenue dynamics by analyzing its most important segment, Advisory Services. Over the last two years, CBRE’s Advisory Services revenue (leasing, capital markets) averaged 10.9% year-on-year growth.

This quarter, CBRE reported year-on-year revenue growth of 13.5%, and its $10.26 billion of revenue exceeded Wall Street’s estimates by 2.1%.

Looking ahead, sell-side analysts expect revenue to grow 9.4% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and suggests its products and services will see some demand headwinds.

CBRE’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 4.1% over the last two years. This profitability was lousy for a consumer discretionary business and caused by its suboptimal cost structure.

This quarter, CBRE generated an operating margin profit margin of 4.7%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

CBRE’s EPS grew at a solid 13.7% compounded annual growth rate over the last five years, higher than its 10.3% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

In Q3, CBRE reported adjusted EPS of $1.61, up from $1.20 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects CBRE’s full-year EPS of $5.98 to grow 15.7%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

CBRE has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.1%, lousy for a consumer discretionary business.

CBRE broke even from a free cash flow perspective in Q3. The company’s cash profitability regressed as it was 5.5 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

CBRE historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 9.6%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, CBRE’s ROIC averaged 4.4 percentage point decreases over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

CBRE reported $1.67 billion of cash and $7.39 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $3.11 billion of EBITDA over the last 12 months, we view CBRE’s 1.8× net-debt-to-EBITDA ratio as safe. We also see its $161 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see CBRE beat analysts’ EPS expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. Overall, this print had some key positives. The stock traded up 2.5% to $168.01 immediately after reporting.

Updated: December 3, 2025 at 10:01 PM EST

We think that the latest earnings result is only one piece of the bigger puzzle. If you’re deciding whether to own CBRE, you should also grasp the company’s longer-term business quality and valuation.

CBRE falls short of our quality standards. For starters, its revenue growth was weak over the last five years. On top of that, CBRE’s weak EPS growth over the last five years shows it’s failed to produce meaningful profits for shareholders, and its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

CBRE’s P/E ratio based on the next 12 months is 23x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - you can find more timely opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $175.45 on the company (compared to the current share price of $162.01).