Blackstone (BX) Beats Q3 Earnings & Revenue Estimates

The Blackstone Group L.P. (NYSE:BX) reported third-quarter 2016 economic net income (ENI (MI:ENI)) of 57 cents per share, which surpassed the Zacks Consensus Estimate of 51 cents. Moreover, the figure compared favorably with the prior-year economic net loss of 35 cents per share.

Shares of Blackstone increased around 3.4% in the pre-market trading session, reflecting the markets’ optimism regarding the earnings beat. Notably, the price reaction during the full trading session will provide a better idea about how investors accepted the results.

Better-than-expected results were attributable to a significant increase in revenues. Also, growth in assets under management (AUM) continued to be impressive. However, escalated expenses acted as a major headwind.

Blackstone reported ENI of $687 million, as against an economic net loss of $415.9 million in the prior-year quarter.

Higher Revenues Supported Results

Total revenue (GAAP basis) increased significantly year over year to $1.43 billion. The rise was mainly due to higher performance fees and investment income, partially offset by lower fee and interest and dividend revenue. Further, total revenue comfortably surpassed the Zacks Consensus Estimate of $1.16 billion.

Total expenses (GAAP basis) jumped 62% year over year to $773.8 million. The hike was primarily driven by a rise in total compensation and benefits, partially offset by a fall in fund expenses, and general, administrative and other expenses.

Fee-earning AUM grew 11% year over year to $267.8 billion. Total AUM amounted to $361.0 billion as of Sep 30, 2016, up 8% year over year. The rise in total AUM was largely driven by $68.5 billion of gross inflows.

As of Sep 30, 2016, Blackstone had $3.9 billion in total cash, cash equivalents and corporate treasury investments.

Our Viewpoint

Blackstone remains well positioned to capitalize on the changing investment landscape by making long-term investments and augmenting its fund-raising ability. In addition, current dislocation in the credit markets and increased liquidity pressure are anticipated to create more investment opportunities for the company.

However, increased dependence on management and advisory fees can adversely affect the company’s financials in the near term. Also, high dependence on commitment from investors for the alternative investment funds can adversely affect revenue growth.

Currently Blackstone carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

Performance of Other Investment Managers

Waddell & Reed Financial, Inc. (NYSE:WDR) reported third-quarter 2016 adjusted earnings of 64 cents per share, surpassing the Zacks Consensus Estimate of 51 cents. Better-than-expected results were primarily driven by lower expenses. A decline in revenues, elevated outflows and lower AUM were the other undermining factors.

Ameriprise Financial, Inc. (NYSE:AMP) reported operating earnings (excluding annual unlocking) per share of $2.29, which missed the Zacks Consensus Estimate of $2.41. The results came in lower than expected primarily due to escalated operating expenses. However, a rise in revenues and the increase in assets under management and assets under administration were on the positive side.

BlackRock, Inc. (NYSE:BLK) reported third-quarter 2016 adjusted earnings of $5.14 per share, which handedly surpassed the Zacks Consensus Estimate of $5.05. Earnings were better than expected primarily due to a decline in total expenses. However, lower revenues acted as a headwind.

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