Blackstone Beats on Earnings, Rev

Zacks

The Blackstone Group LP’s (BX) first-quarter 2013 economic net income (ENI) came in at 55 cents per share, beating the Zacks Consensus Estimate by a penny. Moreover, this compares favorably with ENI of 44 cents per share recorded in the year-ago quarter.

Better-than-expected results were aided by substantial top-line growth, offset by higher operating expenses. Steady assets under management (:AUM) and improved balance sheet were the other positives for the quarter.

Blackstone reported ENI of $628.3 million, rising 28.0% from $491.2 million in the prior-year quarter.

Behind the Headlines

Blackstone’s total revenue (GAAP basis) augmented 31.0% to $1,246.5 million from $952.0 million in the year-ago quarter. This also came ahead of the Zacks Consensus Estimate of $1,153.0 million by 8.1%.

The improvement in revenues was attributable to a solid elevation in total performance fees, total investment income as well as interest and dividend revenues.

Total expense (GAAP basis) also increased 6.5% year over year to $835.1 million. The rise was primarily due to a sizeable hike in total compensation and benefits expenses along with interest expenses. However, these negatives were partially offset by lower fund expenses as well as reduced general, administrative and other costs.

Assets Under Management

Fee-earnings AUM inched up 1.8% from $167.9 billion in the last quarter and 9.4% from $156.3 billion in the year-ago quarter to $170.9 billion. The year-over-year increase was attributable to higher gross inflows and market appreciation, partially offset by outflows and realizations.
 
Total AUM as of Mar 31, 2013 was $218.2 billion, up 3.8% from $210.2 billion as of Dec 31, 2012 and 14.8% from 190.1 billion as of Mar 31, 2012. The rise was primarily driven by strong organic net inflows and market appreciation across all asset management segments.

Capital and Liquidity

As of Mar 31, 2013, Blackstone had $2.2 billion in cash and liquid investments. Moreover, the company had $6.7 billion in total cash and investments at the end of the quarter.

The company had no borrowings outstanding against its $1.1 billion revolving credit facility, which was amended in Jul 2012. The amendment extended the expiry of the facility to Jul 2017.

Distribution Update

Concurrent with the earnings release, Blackstone announced a quarterly distribution of 30 cents per unit, payable on May 6 to stockholders of record as of Apr 29.

Performance of Other Asset Managers

BlackRock, Inc. (BLK) substantially surpassed the Zacks Consensus Estimate. The improvement was primarily attributable to increased top line, partially offset by higher operating expenses.

Our Viewpoint

Blackstone’s investment appreciation coupled with the growing requirement for risk management and alternative investment solutions within the financial service industry is expected to prove beneficial for the company going forward. Moreover, its sound dividend policy is expected to boost investor’s confidence.

However, a sluggish economic recovery is anticipated to mar bottom-line improvement to some extent.

Among other asset managers, Waddell & Reed Financial Inc. (WDR) is scheduled to report its earnings on Apr 23 and T. Rowe Price Group, Inc. (TROW) on Apr 24.

Currently, Blackstone carries a Zacks Rank #2 (Buy).

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