On January 9, 2013, we upgraded The Blackstone Group LP (BX) to Outperform based on this asset manager’s strong fund raising ability and sound expansion activities.
Why the Upgrade?
Over the last 90 days, the Zacks Consensus Estimate for 2012 has increased nearly 11.0%. In addition, the company has delivered three positive earnings surprises in the last four quarters with an average beat of 18.1%. These factors are the primary driving force behind the recommendation revision.
Blackstone is anticipated to announce its fourth quarter 2012 results on January 31. The Zacks Consensus Estimate for the fourth quarter is pegged at 46 cents on revenue expectation of $1,120 million. The company had delivered better-than-expected third-quarter earnings on the back of augmented top line, partially offset by higher expenses.
Further, Blackstone’s robust expansion initiatives (organic and inorganic), powerful asset under management growth, solid fund raising ability and capital deployment actions were among the positives. The company has been successfully raising money for many of its newly launched funds despite a challenging fund raising environment for asset managers. This is expected to sustain the company’s AUM growth over the next several quarters.
Moreover, the company has uninvested capital of $36 billion as of September 30, 2012, which is expected to be meaningfully deployed going forward. Also, at a time when most of the companies are undertaking cost reduction initiatives to bring down operating expenses, Blackstone has been witnessing declining expenses without resorting to such efforts. We believe that improving operating efficiency would aid the bottom-line growth in the upcoming quarters.
The earnings ESP (expected surprise prediction) – the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate – for the company is 0.00% for the fourth quarter. This, along with its Zacks Rank #3 (Hold), indicates that the company is expected to report in line with the Zacks Consensus Estimate.
Other Stocks to Consider
Other stocks in the finance sector that are performing well and are worth considering include AllianceBernstein Holding L.P. (AB) and Virtus Investment Partners, Inc. (VRTS). Both are Zacks Rank #1 (Strong Buy) stocks.
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