Blackstone Beats on Earnings & Revs
The Blackstone Group L.P.’s (BX) second-quarter 2013 economic net income (ENI) came in at 62 cents per share, beating the Zacks Consensus Estimate of 52 cents. Moreover, this compares favorably with ENI of 19 cents per share recorded in the year-ago period.
Better-than-expected results were aided by substantial top-line growth, partially offset by higher operating expenses. Steady assets under management (:AUM) and an improved balance sheet were the other tailwinds for the quarter.
Blackstone reported ENI of $703.2 million, rising 231.1% from $212.3 million in the prior-year quarter.
Behind the Headlines
Blackstone’s total revenue (GAAP basis) augmented 129.7% to $1,440.5 million from $627.2 million in the year-ago quarter. This also came in ahead of the Zacks Consensus Estimate of $1,176.0 million by 22.5%.
The improvement in revenues was attributable to a solid elevation in total performance fees, total investment income as well as rise in interest and dividend revenues.
Total expense (GAAP basis) also increased 23.6% year over year to $914.8 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 and reduced general, administrative and other costs.
Assets Under Management
Fee-earnings AUM inched up 11.9% from $157.6 billion in the year-ago quarter and 3.2% from $170.9 billion in the prior quarter to $176.3 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 Jun 30, 2013 was $229.6 billion, up 20.7% from $190.3 billion as of Jun 30, 2012 and 5.2% from $218.2 billion as of Mar 31, 2013. The rise was primarily driven by strong organic net inflows and market appreciation across all asset management segments.
Capital and Liquidity
As of Jun 30, 2013, Blackstone had $2.3 billion in cash and liquid investments. Moreover, the company had $7.1 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 23 cents per unit, payable on Aug 5 to stockholders of record as of Jul 29.
Our Viewpoint
Blackstone’s investment appreciation coupled with the increasing need 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 shareholder’s confidence.
However, slow investment realization in the near future is anticipated to adversely affect the company’s earnings to some extent.
Among other asset managers, Ameriprise Financial, Inc. (AMP) and T. Rowe Price Group, Inc. (TROW) are scheduled to report earnings on Jul 24 and Waddell & Reed Financial, Inc. (WDR) on Jul 30.
Currently, Blackstone carries a Zacks Rank #3 (Hold).
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