The Blackstone Group Inc. BX continues to benefit from solid organic growth and fund-raising capability amid these trying times. However, high debt levels and mounting expenses are major near-term concerns.
Blackstone’s organic growth is impressive. Revenues (GAAP basis) witnessed a five-year (2015-2019) CAGR of 12.1%. Though the company recorded negative revenues in the first quarter of 2020, growth in revenues is expected to continue in the upcoming quarters on the back of promising performance of its funds amid the global economic slowdown.
Moreover, the company’s fee-earning assets under management (AUM) and total AUM has witnessed strong growth, aided by increasing net inflows. Over the last four years (2016-2019), fee-earning assets under management (AUM) and total AUM witnessed a CAGR of 13.8% and 15.9%, respectively. The uptrend in both continued in the first quarter. The company’s diversified products, revenue mix and superior position in the alternative investment space will likely aid continued AUM growth despite expectations of outflows due to the current crisis.
Also, shares of this Zacks Rank #3 (Hold) company have gained 28% over the past year against the 8.7% decline recorded by the industry.
However, rising expense levels remain concerning for Blackstone. Total expenses witnessed a five-year (2015-2019) CAGR of 6.4%. Expenses are expected to continue rising as the company’s well-performing funds require more headcount. Its consistent investment in franchise is also leading to higher costs.
The volatile trend in its earnings over the past few quarters has been affecting Blackstone’s dividend payouts. The company’s dividend payouts are a direct function of the earnings generated. Although it has an efficient share-repurchase plan in place, chances of Blackstone sustaining its current capital-deployment activities are dim, given the significantly high level of debt compared with its peers.
Further, the Zacks Consensus Estimate for earnings has been revised 8.5% and 5.1% downward for 2020 and 2021, respectively, over the past two months.
Stocks to Consider
AllianceBernstein L.P. AB has witnessed a marginal upward earnings estimate revision for 2020 over the past 30 days. Its shares have lost 9.1% over the past year. At present, it sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BrightSphere Investment Group Inc. BSIG recorded an upward earnings estimate revision of 2.2% for the current year over the past 30 days. Its shares have depreciated 11.1% over the past year. It currently flaunts a Zacks Rank of 1.
BlackRock, Inc. BLK witnessed an upward earnings estimate revision of 3% for 2020 over the past 30 days. Its shares have gained 19.4% over the past year. At present, it sports a Zacks Rank of 1.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Blackstone Group IncThe (BX) : Free Stock Analysis Report
BlackRock, Inc. (BLK) : Free Stock Analysis Report
AllianceBernstein Holding L.P. (AB) : Free Stock Analysis Report
BrightSphere Investment Group Inc. (BSIG) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research