Blackstone Group: Recovery Marches On

Nov. 6.09 | About: The Blackstone (BX)

As mentioned Friday morning, we added back to our Blackstone Group (NYSE:BX) exposure as the stock jumped back over a key moving average on the back of a solid earnings report. After 7 sessions of purgatory, the stock is in a better position today (click chart to enlarge).

Unlike a "widget maker" type of company, I will give analysts a lot more leeway for a firm such as this with so many moving parts. However, the difference in revenue between what analysts estimated ($450 million) and actual ($603 million) is astonishing. As long as markets hold up, it should allow Blackstone to continue to unload its prospects onto a world full of newly minted US dollars and nowhere to put them. [Oct 12, 2009: Blackstone Group Surges on Potential Listing of 8 Portfolio Companies, and Selling of 5 Others] Full (and lengthy) report here.

Some color on earnings:

  • Private equity firm Blackstone Group LP posted a forecast-beating quarterly profit and said it is gearing up for more deals and IPOs as the lending and equity markets recover.
  • Blackstone's third-quarter earnings before income taxes, non-cash charges for vesting equity-based compensation and amortization of intangible assets -- a measure it calls "economic net income" (ENI) -- were $278.4 million, compared with a loss of $509.3 million a year earlier.
  • On an after-tax basis, ENI was 25 cents a share. Analysts expected, on average, 15 cents a share, according to Thomson Reuters I/B/E/S/.
  • Revenue fell to $603.8 million in the latest quarter from $833 million a year earlier, although it did rise on a sequential basis from the second-quarter total of $403.6 million.
  • The value of Blackstone's private equity portfolio rose by 5% in the third quarter, although the value of its real estate portfolio fell by 0.4%.
  • The company said it would pay its regular quarterly distribution of 30 cents a share to unit holders.
  • The company, which has immense real estate and private equity assets, has stepped up deal activity in the past few months, including buying Anheuser-Busch InBev's (OTCPK:AHBIF) U.S. theme parks for up to $2.7 billion. It is also considering initial public offerings for a number of its companies.
  • "We see great opportunities to buy assets from motivated sellers," Blackstone Chief Operating Officer Tony James said on a conference call. He said Blackstone has $27 billion of "dry powder" -- capital available for investment.
  • Blackstone Chief Executive Stephen Schwarzman said in a press release that the worst is over, although a recovery in the economy could be "gradual and uneven."

For the sake of being complete, let me add this item, although in the stock market we live in a world of make believe (GAAP accounting does not count).

  • On a GAAP (generally accepted accounting principles) basis, Blackstone lost $176.2 million in the latest quarter, compared to $340.3 million a year ago. The latest GAAP results include $201 million in IPO- and acquisition-related charges, the company said, as well as other items.

Some analyst commentary:

  • JMP Securities reiterated its market perform rating on Blackstone shares following the report, calling the performance "a good, solid beat" with most of the upside coming from the company's real estate private equity and credit and marketable alternatives business.
  • The firm also noted advisory revenues, though down on a year-over-year basis, did well in the latest quarter, coming in at $97.3 million, well ahead of JMP's estimate of $80.5 million and higher on a sequential basis. Blackstone's restructuring and reorganization advisory unit has done well with so many companies paring down in the past year.

Disclosure: Long Blackstone Group in fund; no personal position