Blackstone Beats on Q1 Earnings, Revenues Up - Analyst Blog

Top-line growth drove The Blackstone Group L.P.'s BX first-quarter 2014 economic net income ENI of 70 cents per share, which surpassed the Zacks Consensus Estimate by 25%. Also, the figure was up 27% from 55 cents in the prior-year quarter.

Shares of Blackstone rose more than 4% in the pre-trading session, reflecting an overwhelming response among investors. The movement of the stock price when the trading session opens will give a better idea about whether Blackstone has been able to meet expectations.

Better-than-expected results were attributable to revenue growth, partly offset by higher expenses. Further, a rise in assets under management (AUM) and an improved balance sheet were the other positives.

Blackstone reported ENI of $813.9 million, up 30% from the prior-year quarter.

Behind the Headlines

Blackstone's total revenue increased 22% year over year to $1,526.7 million. Moreover, it surpassed the Zacks Consensus Estimate of $1,332.0 million. The rise was attributable to increase in performance fees, investment income, management and advisory fees as well as interest and dividend revenues. These were partially offset by decline in other revenues.

Total expenses rose 6% from the prior-year quarter to $887.9 million. The rise was primarily due to increase in total compensation and benefits costs as well as general, administrative and other expenses. These were partially offset by fall in other interest expenses and fund expenses.
 
Fee-earnings AUM grew 19% from the year-ago quarter to $203.6 billion. Total AUM as of Mar 31, 2014 was $271.7 billion, up 25% year over year. The rise in AUM was primarily driven by $7.3 billion of market appreciation across all asset management segments, partially offset by $1.3 billion of net outflows.

Capital and Liquidity

As of Mar 31, 2014, Blackstone had $1.9 billion in cash, corporate treasury and liquid investments. Moreover, the company had $8.2 billion in total cash and investments at the end of the quarter.

The company had no borrowings outstanding against its $1.1 billion revolving credit facility expiring in 2017.

Our Viewpoint

The changing investor preference for alternative asset classes and other risk management will continue to boost Blackstone's top line in the forthcoming quarters. Further, we foresee steady improvement in AUM backed by steady inflows in all the segments.

However, we are concerned about adverse effects of the ongoing capital market volatility and stringent regulations. Both these factors could weigh on the company's financial performance in the near term.

Currently, Blackstone carries a Zacks Rank #3 (Hold).

Among other asset managers, Ameriprise Financial, Inc. AMP and Invesco Ltd. IVZ are scheduled to announce results on Apr 28 and May 1, respectively, Franklin Resources Inc. BEN will announce second-quarter fiscal 2014 results on Apr 28.