CBRE Approves $5B Stock Buyback, Says Stock Undervalued Despite 40% Rally
CBRE is expanding its stock repurchase program after ending the third quarter in what Chief Financial Officer Emma Giamartino called an exceptionally strong financial position.
The Dallas-based brokerage said its board of directors approved an additional $5B in stock buybacks, which add to an existing $4B repurchase program. Executives at CBRE believe the stock is still underpriced despite a more than 40% increase in its value this year.
“The expanded authorization is particularly timely given that we believe our shares’ current valuation understates our long-term growth prospects,” Giamartino said in a statement.
She pointed to the brokerage’s $4B in liquidity at the end of the third quarter, low leverage and free cash flow on track to exceed $1B as signs the business was seeing the benefits of a more active commercial real estate market.
“This announcement is a clear positive, and we view it as another sign of management’s confidence heading into 2025,” analysts at financial services firm William Blair wrote in a note to investors. Even without an expected rebound in capital markets activity in 2025, CBRE is likely to achieve record core earnings per share in 2025, the analysts wrote.
The broader repurchase plan follows a quarter in which CBRE’s total revenue was up 15% from the year prior to $9B, boosted by revenue growth from global property sales, including 20% year-over-year growth in U.S. fees.
Executives at the brokerage sounded upbeat on their third-quarter earnings call Oct. 24. CEO Bob Sulentic said the Federal Reserve’s pivot to cutting interest rates heightened investor enthusiasm headed into 2025, which would translate into revenue growth for the brokerage.
“We share the market’s enthusiasm and expect to benefit from a capital markets recovery over the next several years,” he told analysts on the call, while the brokerage also boosted its year-end outlook across most of its business lines.
CBRE’s existing stock repurchase program authorization had $1.4B in remaining capital before the board added additional funding. Since 2021, the brokerage has repurchased 36 million shares for roughly $3B at an average price of $83.50 per share.
The stock has been trading above $100 per share since August and was up slightly Friday morning to above $132 per share. The current repurchase authorization would allow the firm to buy back nearly 49 million shares, close to 16% of CBRE’s fully diluted share count, according to the William Blair note.
