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Will Volatile Markets Dampen Blackstone's (BX) Q3 Earnings?

The Blackstone Group L.P.BX is scheduled to report third-quarter 2015 results on Thursday, Oct 15, before the opening bell.

Last quarter, Blackstone missed the Zacks Consensus Estimate owing to a considerable plunge in revenues. Notably, economic net income ("ENI") for the quarter nosedived 62% due to a 46% year-over-year fall in revenues.

Overall, the company has delivered positive earnings surprises in two of the trailing four quarters, with an average beat of 7.34%.

Will Blackstone be able to deliver an earnings surprise this time? Let's see how things have shaped up for this announcement.

Factors Influencing Q3 Results

Equity markets witnessed persistent weakness during the quarter, and this will likely hurt Blackstone's earnings. This is because the ENI of an asset manager is directly linked to the value of its underlying fund investments, which at present, face pressure from the ongoing market correction.

As such, volatile mark-to-market process is anticipated to considerably hurt Blackstone's private equity and real estate portfolios. Further, sluggish industry-wide realization activities likely hint at lower investment income for Blackstone.

However, based on company's expectations to start earning fee on roughly $57 billion of committed capital during the quarter, we expect to see a rise in management fees in the upcoming release.

Moreover, uptrend in Blackstone's fee-earning AUM and total AUM, which grew steadily in the first six months of 2015, is expected to have continued into the third quarter as well, driven by the company's extensive fund-raising activity. This indicates stable or improving fee income for the company.

On the expense side, however, costs associated with the recent spin-off of Financial Advisory segment (completed on Oct 1) is projected to keep expenses high for the quarter. The overall uptrend in expenses is anticipated to continue as well, owing to higher compensation and benefit costs as the company's well-performing funds require more headcount.

Blackstone's activities failed to win analysts' confidence. As a result, the Zacks Consensus Estimate declined over 52% to 28 cents per share in the past 7 days.

Earnings Whispers

Our proven model does not conclusively show that Blackstone is likely to beat the Zacks Consensus Estimate in the third 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. Unfortunately, this is not the case here as elaborated below.

Zacks ESP : The Earnings ESP for Blackstone is -128.57%. This is because the Most Accurate estimate of a loss of 8 cents per share stands considerably below the Zacks Consensus Estimate of 28 cents per share.

Zacks Rank : Blackstone's Zacks Rank #5 (Strong Sell) further lessens the chance of an earnings surprise.

Stocks to Consider

Here are a few finance stocks you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

The PNC Financial Services Group, Inc. PNC has an Earnings ESP of +1.12% and carries a Zacks Rank #3. The company is scheduled to report on Oct 14.

Wintrust Financial Corporation WTFC is also slated to release results on Oct 14. The company has an Earnings ESP of +2.35% and carries a Zacks Rank #3.

SunTrust Banks, Inc. STI has an Earnings ESP of +1.21% and carries a Zacks Rank #3. It is scheduled to report on Oct 16.

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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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