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Blackstone Q2 Earnings Hurt on Lower Revenues, Costs Fall - Analyst Blog

The Blackstone Group L.P.BX reported second-quarter 2015 economic net income (ENI) of 43 cents per share, which considerably lagged the Zacks Consensus Estimate of 52 cents. Moreover, the figure came in a massive 63% lower than the prior-year quarter figure.

Our quantitative model predicted that Blackstone may not beat the Zacks Consensus Estimate in the second quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least #2 (Buy) or #3 (Hold) for this to happen. Though the company holds a Zacks Rank #3, it had an Earnings ESP of -13.46%.

The Blackstone Group LP - Earnings Surprise | FindTheBest

Results were adversely affected mainly due to a pressurized top line. However, lower expenses were an upside during the quarter. Moreover, growth in assets under management (AUM) continued to be impressive.

Blackstone reported ENI of $508.4 million, down 62% year over year.

Behind the Headlines

Total revenue (GAAP basis) plunged 46% year over year to $1.23 billion. The substantial decline was mainly owing to lower total performance fees (down 59%), total investment income (down 75%) and net management and advisory fees (down 7%). These were, however, partly offset by higher interest and dividend revenue (up 43%) and a significant increase in other revenues. Further, it came above the Zacks Consensus Estimate of $1.09 billion.

Total expenses (GAAP basis) declined 16% year over year to $914.4 million. The reduction was primarily driven by lower total compensation and benefits costs, partly offset by a rise in fund expenses, interest expenses as well as general, administrative and other costs.

Fee-earnings AUM grew 14% year over year to $239.3 billion. Total AUM amounted to $332.7 billion as of Jun 30, 2015, up 19% year over year. The rise in total AUM was largely driven by $20.2 billion of strong fund appreciation and $93.9 billion of gross inflows.

As of Jun 30, 2015, Blackstone had $4.3 billion in cash, corporate treasury and liquid investments. Moreover, the company had $2.8 billion as long-term borrowings at the end of the quarter.

Our Viewpoint

Blackstone seems well positioned to capitalize on the changing investor preference for alternative asset classes and other risk management strategies. Moreover, the company's robust balance sheet is expected to augment its fund-raising ability, given the favorable economic conditions. Further, we foresee steady improvement in AUM, backed by continued inflows in all the segments.

However, we remain concerned about the adverse effects of the ongoing capital market volatility and stringent regulations. These factors could weigh on the company's financial performance in the near term.

Among other investment managers, Ameriprise Financial, Inc. AMP , Waddell & Reed Financial, Inc. WDR and Invesco Ltd. IVZ are scheduled to release second-quarter earnings results on Jul 22, Jul 28 and Jul 30, respectively.

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INVESCO LTD (IVZ): Free Stock Analysis Report

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BLACKSTONE GRP (BX): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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