Driven by prudent expenses management, shares of Apollo Global Management, LLC APO gained 5.1% following the first-quarter earnings release on May 3. However, the company reported economic net loss of 30 cents per share, wider than the Zacks Consensus Estimate of loss of 4 cents. Also, the reported figure compared unfavorably with the economic net income of 82 cents per share in the year-ago period.
Results were primarily affected by poor performance across all segments, each witnessing a decline in economic income. However, higher assets under management (AUM) supported the results. Further, lower expenses acted as a tailwind during the quarter.
GAAP net loss attributable to Apollo Global was $62.6 million or 34 cents per Class A share against net income of $145.2 million or 75 cents per Class A share in the prior-year quarter.
Decline in Revenues Offsets Rise in AUM and Lower Expenses
Total revenues were $166.9 million, plunging 75% year over year. Also, it lagged the Zacks Consensus Estimate of $242 million. The decline was primarily due to investment loss.
Apollo Global's total revenues for combined segments in the first quarter amounted to $149.6 million, down 78% from the prior-year quarter. The plunge was primarily due to significant revenue decline in the private equity segment.
Total expenses for combined segments decreased 38% year over year to $214.9 million in the reported quarter. The decline was primarily due to a fall in profit sharing expenses resulting from the decrease in carried interest income.
Fee-earnings AUM increased 18% to $182.5 billion from $154.2 million in the year-ago quarter. As of Mar 31, 2018, total AUM was $247.4 billion, up 25% from $197.5 billion as of Mar 31, 2017. The rise in total AUM was due to an increase in private equity, credit and real estate segments.
Capital and Liquidity
As of Mar 31, 2018, Apollo Global had $988 million of cash and cash equivalents and $1.4 billion of debt (excluding $500 million of undrawn revolving credit facility). These amounts exclude cash and debt pertaining to Apollo Global's consolidated funds and consolidated variable interest entities.
Along with the earnings release, Apollo Global declared a quarterly cash distribution of 38 cents per Class A share. This distribution will be paid on May 31, 2018 to shareholders of record at the close of business on May 18.
Significant decline in revenues keeps us apprehensive about the stock. Moreover, volatility in the capital market and strict regulatory reforms, we believe, could adversely impact the company's performance going forward.
However, Apollo Global is poised to grow through meaningful acquisitions, strategic alliances and divestitures. Also, its expense control initiatives are encouraging.
Apollo Global Management, LLC Price, Consensus and EPS Surprise
Apollo Global Management, LLC Price, Consensus and EPS Surprise | Apollo Global Management, LLC Quote
Currently, Apollo Global carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Performance of Other Asset Managers
Franklin Resources BEN recorded second-quarter fiscal 2018 earnings per share of 78 cents, beating the Zacks Consensus Estimate of 75 cents. Further, the bottom line compared favorably with the prior-year quarter figure of 74 cents per share.
Legg Mason LM delivered a positive earnings surprise of 22.9% in fourth-quarter fiscal 2018 (ended Mar 31). The company reported adjusted net income of 86 cents per share, outpacing the Zacks Consensus Estimate of 70 cents. Moreover, results improved 13.2% year over year.
T. Rowe Price Group TROW reported earnings per share of $1.77 for first-quarter 2018, which lagged the Zacks Consensus Estimate of $1.78. However, the bottom line improved 14.9% from the year-ago figure of $1.54.
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