On Dec 17, 2013, we reaffirmed our Neutral recommendation on
The Blackstone Group L.P.
). Though the company reported lower-than-expected third-quarter
results, its consistently increasing assets under management
(AUM) and efficient inorganic growth strategy are impressive.
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On Oct 17, Blackstone reported third-quarter 2013 earnings per
share of 56 cents, missing the Zacks Consensus Estimate by a
penny. A decline in the top line was primarily responsible for
the miss. However, lower operating expenses was a positive.
The Zacks Consensus Estimate for 2013 fell marginally to $2.37
per share over the last 60 days. However, for 2014, the Zacks
Consensus Estimate increased nearly 1.0% to $2.97 per share over
the same time period. As a result, Blackstone now has a Zacks
Rank #3 (Hold).
In the present economic scenario, when most companies are
undertaking initiatives to reduce costs, Blackstone has been
witnessing a decline in total expenses without resorting to such
efforts. Moreover, the company's steadily improving AUM, along
with its fund raising ability and organic growth prospects
position it well ahead of its peers.
However, Blackstone's huge dependence on management and advisory
fees as the largest source of revenues, could weigh on the
company's financials in the near term, if there is a change in
the managed assets or slowdown in business activities. Further,
despite an improved economic scenario, any future crisis along
with impending regulatory changes could limit Blackstone's
revenue growth and cash flow.
Other Stocks worth Consideration
Some better-ranked investment managers include
Artisan Partners Asset Management Inc.
Brookfield Asset Management Inc.
Kohlberg Kravis Roberts & Co. L.P.
). All these stocks carry a Zacks Rank #1 (Strong Buy).