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Apollo Global Beats on Earnings & Revs

Zacks Equity Research

Apollo Global Management, LLC’s (APO) third-quarter 2013 economic net income (ENI) came in at $1.34 per share, substantially beating the Zacks Consensus Estimate of 75 cents. Moreover, this compares favorably with ENI of 98 cents recorded in the year-ago period.

Better-than-expected results were driven by top-line growth, partially offset by higher operating expenses. Moreover, an increase in assets under management (:AUM) was the tailwind for the quarter.

Apollo Global reported ENI of $528.6 million, up 39.5% from $379.0 million in the prior-year quarter.

Behind the Headlines

Apollo Global’s total revenue increased 58.9% year over year to $1,132.1 million. This also beat the Zacks Consensus Estimate of $660.0 million. The rise was mainly driven by an increase in carried interest from the company’s private equity segment.

Total expense increased 15.4% from the prior-year quarter to $600.1 million. The rise was primarily due to increase in total compensation and benefits charges, interest expense, professional fees as well as occupancy costs. These were partially offset by a decrease in general, administrative and other costs, placement fees as well as depreciation and amortization expenditures.

Fee-earnings AUM rose 2.1% from the year-ago quarter to $79.3 billion. Total AUM as of
Sep 30, 2013 was $112.7 billion, up 2.7% from $109.7 billion as of Sep 30, 2012.

Capital and Liquidity

As of Sep 30, 2013, Apollo Global had $1.1 billion in cash and cash equivalents and $728.0 million debt.

Distribution Update

Along with the earnings release, Apollo Global announced a cash distribution of $1.01 per Class A share. The distribution comprises a quarterly distribution of 7 cents and an additional 94 cents related to fund realization. The distribution will be paid on Nov 29 to stockholders of record as of Nov 22.

Performance of Other Investment Managers

Waddell & Reed Financial, Inc.’s (WDR) earnings surpassed the Zacks Consensus Estimate. Robust results were driven by top-line growth, partially offset by higher operating expenses.

BlackRock, Inc.’s (BLK) third-quarter 2013 adjusted earnings were in line with the Zacks Consensus Estimate. Results benefited from rise in revenues, which were offset by higher operating expenses.

The Blackstone Group L.P.’s (BX) third-quarter results, on the other hand, missed the Zacks Consensus Estimate by a penny. Lower-than-expected results were due to a fall in the top line, partially offset by lower expenses.

Our Viewpoint

We believe that robust performance of Apollo Global’s investment portfolios, particularly its private equity segment, will drive growth going forward. Moreover, the company’s strong liquidity position and consistent fund raising ability indicate increased capital deployment activities in the forthcoming quarters.

However, we remain concerned about the present capital market volatility exerting pressure on the company’s financial performance in the near term.

Currently, Apollo Global carries a Zacks Rank #3 (Hold).

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