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Why Earnings Beat is Less Likely for Blackstone (BX) in Q2

Zacks Equity Research

Blackstone BX is scheduled to report second-quarter 2019 results on Jul 18, before the opening bell. Its revenues and earnings for the to-be-reported quarter are projected to decline year over year.

In the last reported quarter, the company’s earnings lagged the Zacks Consensus Estimate. Results were adversely impacted by an increase in expenses, partly offset by higher revenues and growth in assets under management (AUM).

Blackstone does not have an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in only two of the trailing four quarters.

Blackstone Group Inc/The Price and EPS Surprise
 

Blackstone Group Inc/The Price and EPS Surprise

Blackstone Group Inc/The price-eps-surprise | Blackstone Group Inc/The Quote

Activities of the company in the second quarter failed to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of 57 cents has moved 5% lower over the past 30 days. The figure indicates a decline of 36.7% from the prior-year quarter’s reported number.

The consensus estimate for sales of $1.42 billion suggests a decline of 27.7% from the year-ago quarter’s reported figure.

Factors to Influence Q2 Results

Driven by net inflows, Blackstone’s fee-earning AUM and total AUM have been witnessing consistent growth since the past few years. The same trend is likely to have continued in the to-be-reported quarter despite an overall challenging operating backdrop.

The Zacks Consensus Estimate for fee-earning AUM for the second quarter is pegged at $369 billion, which indicates 10.8% improvement from the prior-year quarter’s reported number. Also, the consensus estimate for total AUM of $529 billion suggests 20.5% growth from the prior-year quarter’s reported figure.

Net management and advisory fees (segment revenues) are projected to be $829 million, indicating growth of 14.7% from the year-ago quarter’s reported number.

On the cost front, Blackstone’s expenses have remained elevated over the past few years mainly because of higher general, administrative and other expenses. As the company continues to make investments in franchise, total expenses are expected to have remained elevated in the second quarter.

Here is what our quantitative model predicts:

According to our quantitative model, chances of Blackstone beating the Zacks Consensus Estimate in the second quarter are low. That is because it does not have the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Blackstone is -12.50%.

Zacks Rank: Blackstone currently has a Zacks Rank #3. While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings beat.

Stocks That Warrant a Look

Here are some finance stocks that you may want to consider as these have the right combination of elements to post an earnings beat this quarter, per our model.

TD Ameritrade Holding Corporation AMTD is slated to release results on Jul 22. It currently has an Earnings ESP of +0.15% and a Zacks Rank #3.

T. Rowe Price Group, Inc. TROW has an Earnings ESP of +0.39% and sports a Zacks Rank #1 (Strong Buy) at present. The company is expected to release results on Jul 24.

Ares Capital Corporation ARCC is expected to release results on Jul 30. It presently has an Earnings ESP of +1.02% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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