Goldman Says Buy Jones Lang LaSalle, But Continues To Prefer CBRE

Goldman Sachs has upgraded Jones Lang LaSalle Inc

to Buy from Neutral following 32.7 percent underperformance YTD versus the S&P 500. But, the brokerage continues to prefer CBRE Group Inc

. Capital markets (property sales) sentiment dominates broker discussion despite representing about 25 percent of JLL's 2016E EBITDA and the brokerage noted that capital markets activity is "clearly decelerating." However, "(1) with flat capital markets we would expect JLL to realize strong growth on share gains and business diversity; and (2) we expect long-term capital markets growth as higher turnover institutional investors represent a greater % of CRE (commercial real estate) ownership," analyst Brad Burke wrote in a note. The analyst acknowledged risks with JLL from capital markets as he estimate JLL derives about 10 percent of 2016 EBITDA from UK leasing and capital markets, and noted thatBrexit uncertainties may hurt next couple of quarters. But, the company's less-leveraged balance sheet offers lower-cost incremental capital. "While we continue to forecast less investment management income, we believe this risk is much better appreciated following the 40% decline in share prices from the 52-week high," Burke highlighted. Though the analyst expects both CRE brokers to outperform, he prefers CBRE (Buy) on less UK exposure, more year-over-year benefit from recent M&A, and less pressure from tough investment management comps. Burke maintained his price target of $141 on Jones Lang LaSalle, but raised CBRE price target by $3 to $38. Shares of Jones Lang LaSalle closed Thursday's regular trading session at $106.82 and CBRE closed at $27.76.