Blackstone (BX) Q1 Earnings Beat, Capital Actions Announced

The Blackstone Group L.P. (NYSE:BX) reported first-quarter 2018 economic net income (ENI (MI:ENI)) of 65 cents per share, which handily surpassed the Zacks Consensus Estimate of 46 cents. However, the figure was 20% below the prior-year quarter level.

Shares of Blackstone have gained more than 2% in pre-market trading. It appears that investors are encouraged with its announcement of additional capital deployment action. Nonetheless, the stock’s price performance after the full day’s trading will give a better indication about investors’ sentiments.

The quarter saw an improvement in assets under management (AUM), mainly driven by inflows. However, lower revenues and a rise in expenses were the undermining factors.

Blackstone reported ENI of $791.7 million, down 18% year over year.

Revenues & Costs Decline

Total revenues (GAAP basis) declined 8% year over year to $1.77 billion. The decrease was mainly due to lower total investment income and incentive fees. However, the top line surpassed the Zacks Consensus Estimate of $1.69 billion.

Total expenses (GAAP basis) rose 7% year over year to $982.9 million. The increase was primarily due to a rise in fund expenses and general, administrative and other costs.

Fee-earning AUM grew 23% year over year to $334.7 billion. Total AUM amounted to $449.6 billion as of Mar 31, 2018, up 22% year over year. The rise in total AUM was largely driven by $18.2 billion of inflows.

As of Mar 31, 2018, Blackstone had $5.4 billion in total cash, cash equivalents and corporate treasury investments.

Capital Deployment Update

Blackstone authorized share repurchase of up to $1 billion of common units and Blackstone Holdings partnership units. This nearly triples $335.8 million of buyback authorization left under the prior authorization.

Moreover, Blackstone received approximately $580 million of pre-tax proceeds in connection with concluding GSO’s investment sub-advisory relationship with FS Investments in April. The company plans to distribute part of the proceeds to unitholders. This will likely result in an incremental 30 cents per unit to be distributed over the next three quarters.

Our Viewpoint

Blackstone remains well positioned to capitalize on the changing investment landscape by making long-term investments and augmenting its fund-raising abilities. However, increased dependence on management and advisory fees can affect the company’s financials in the near term.

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

Performance of Other Investment Manager and Upcoming Releases

BlackRock’s (NYSE:BLK) first-quarter 2018 adjusted earnings came in at $6.70 per share, which handily outpaced the Zacks Consensus Estimate of $6.42. Results benefited from an improvement in revenues, rise in AUM and steady long-term inflows. However, increase in operating expenses acted as a headwind.

Among other investment managers, Ameriprise Financial, Inc. (NYSE:AMP) and Invesco Ltd. (NYSE:IVZ) are slated to report results on Apr 23 and Apr 26, respectively.

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