Private equity firm Apollo reports Q4 loss and first year in red since 2011

By Joshua Franklin

NEW YORK, Jan 31 () - Private equity firm Apollo Global Management on Thursday reported a loss for the last quarter of 2018, contributing to the firm's first year in the red since 2011 as falling equity markets diminished the value of its investments on paper.

Apollo's economic net loss per share was $1.01 in the fourth quarter, steeper than the 82-cent loss analysts had expected, according to Refinitiv data. In the fourth quarter of 2017, Apollo reported economic net income per share of $1.22.

Still, shares were up around 5 percent in mid-morning trading, outshining the broader U.S. stock market, as analysts took comfort from Apollo's assets under management rising to a record $280.3 billion by the end of 2018.

"While we do not dismiss one quarter of challenging investment performance, given that marks can be volatile from period-to-period (and were actually roughly in line with our expectation), we remain encouraged with the business heading into 2019," according to a note by JMP Securities analyst Devin Ryan, who rates the stock "market outperform."

The benchmark S&P 500 index suffered its worst three months in more than 7 years at the end of 2018, dropping about 14 percent in the fourth quarter. In late morning trading, the S&P index was up about 0.4 percent.

Apollo reported its private equity fund depreciated 10.9 percent in the quarter and was down 9.8 percent for 2018. The value of Apollo's public equity holdings fell 29 percent.

"What we've seen in our portfolio is a microcosm of what's been going between the markets and the underlying economy in the U.S.," Chairman, Chief Executive and Co-founder Leon Black said in a statement.

"The fundamentals actually have been pretty attractive... vis-à-vis our own portfolio in terms of revenue and earnings growth. But the market got very skittish in the fourth quarter."

Economic net income reflects the mark-to-market valuation gains or losses on Apollo's portfolio. Peers Blackstone Group, Carlyle Group and KKR & Co have recently deemphasized the earnings metric and focused primarily on distributable earnings, the actual cash available for paying dividends.

Apollo's distributable earnings totaled $252.4 million in the quarter, down 20.4 percent from $317.2 million a year earlier. Blackstone on Thursday posted distributable earnings of $722 million for the fourth quarter, down 42 percent on the year.

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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