Tough Operating Backdrop To Hurt Blackstone (BX) Q4 Earnings

Blackstone (NYSE:BX) is scheduled to report fourth quarter and 2018 results on Jan 31, before the opening bell. Its quarterly revenues and earnings are projected to decline on a year-over-year basis.

In the last reported quarter, the company’s economic net income surpassed the Zacks Consensus Estimate. Growth in assets under management (AUM) and rise in revenues were partially offset by higher expenses.

Moreover, Blackstone boasts an impressive earnings surprise history. Its earnings have surpassed estimates in each of the trailing four quarters, the average positive surprise being 17.5%.

Amid a tough operating environment, activities of the company in the fourth quarter failed to win analysts’ confidence. As a result, the Zacks Consensus Estimate for earnings of 3 cents has moved 25% lower over the past seven days. The figure reflects a year-over-year decrease of 95.8%.

Also, the consensus estimate for sales of $404.7 million indicates a plunge of 78.5% from the year-ago quarter.

Factors to Impact Q4 Results

Driven by net inflows, Blackstone’s fee-earning AUM and total AUM have been witnessing consistent growth since the past few years. The same trend is likely to have continued in the to-be-reported quarter despite overall challenging operating backdrop.

Therefore, the company should have been able to raise funds in the quarter. This will support its fee-earning AUM and total AUM.

The Zacks Consensus Estimate for fee-earning AUM for the fourth quarter is $355 billion, which reflects an improvement of 6% year over year. Also, the consensus estimate for total AUM of $472 billion depicts 8.8% growth from the prior-year quarter.

Net management and advisory fees (segment revenues) are projected to be $772 million, up 5.5% from the year-ago quarter.

Nonetheless, choppy markets and pessimistic investor sentiments might have led to muted deployment of capital and realization activity during the fourth quarter. Hence, Blackstone’s performance fees growth is expected to get hampered. Performance fees (segment revenues) are expected to be a negative $1.32 billion compared with $993 million recorded in the prior-year quarter.

On the cost front, owing to the expected dismal top line performance, total compensation and benefit costs will likely record a decline in the fourth quarter. Hence, Blackstone’s total expenses are expected to fall as compensation and benefit costs constitute a major part of its expenses.

Here is what our quantitative model predicts:

We cannot conclusively predict whether Blackstone will beat the Zacks Consensus Estimate this time. That’s because it does not have the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Blackstone is 0.00%.

Zacks Rank: Blackstone currently has a Zacks Rank #3, which increases the predictive power of ESP. But we need to have a positive Earnings ESP to be sure of the positive surprise.

Stocks That Warrant a Look

Here are some finance stocks that you may want to consider, as according to our model, these have the right combination of elements to post an earnings beat this quarter.

Virtu Financial, Inc. (NASDAQ:VIRT) is slated to release results on Feb 7. The company has an Earnings ESP of +23.36% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ares Capital Corporation (NASDAQ:ARCC) is scheduled to release results on Feb 12. It has an Earnings ESP of +1.10% and carries a Zacks Rank #3.

Garrison Capital Inc. (NASDAQ:GARS) has an Earnings ESP of +11.94% and has a Zacks Rank #2 (Buy). It is scheduled to report results on Mar 5.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?

From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.

This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.

See Stocks Today >>