By Clayton Browne
Apollo Global Management reports mixed-bag second-quarter earnings
In a surprise earnings miss, Apollo Global Management LLC (NYSE:APO) reported on Wednesday, August 6th, that its second-quarter earnings were off by around 6%, under consensus analysts' expectations. Digging into the Q2 report, analysts point out that Apollo sold fewer of its private equity holdings, while both taxes and expenses rose during the period.
Details on Q2 earnings report
Total economic net income after taxes came to $207.5 million, relative to $220.1 million same quarter last year. This resulted in an ENI per share after taxes of 52 cents, below analysts' estimate of 66 cents, according to Thomson Reuters. The firm cited a higher tax provision and increased profit sharing expenses for the $12.6 million reduction in ENI. Apollo Global Management's private equity portfolio was up 5% the quarter, close to the same percentage as both The Carlyle Group LP's (CG) and KKR & Co. L.P.'s (KKR) private equity funds, but below the 8.4% appreciation seen in The Blackstone Group L.P.'s (BX) buyout funds. ENI in Apollo's private equity segment fell 32%. On the other hand, ENI was up 114% in the credit segment due to higher management fees as Athene Holding Ltd. life insurance firm finalized the acquisition of the U.S. life and annuities business of Aviva Plc (AV). Of note, the credit segment represents almost two-thirds of Apollo's assets. Total assets under management were $167.5 billion at the end of the period (June 30th), an increase from $159.3 billion at the end of the prior quarter. The hedge fund firm declared a Q2 dividend of 46 cents, a major improvement from 1.32 cents a year ago.
Other private equity firms increasingly profitable
Apollo Global Management LLC's poor second-quarter performance caught market watchers by surprise, given that most private equity firms had turned in strong quarters. The Blackstone Group L.P., KKR & Co. L.P. and The Carlyle Group LP, for example, all reported significantly increased profits.
RBC rates Apollo Management as Sector Perform
Equity research firm RBC Capital Markets published a note to update investors after Apollo Global Management LLC's second-quarter earnings report. Head analyst Buletn Ozcan suggests that that Apollo's Q2 report wasn't all that bad. "Total revenues for Apollo's combined segments stabilized. While the company had reported a significant decline in total revenues in the previous quarter, the current quarter was marked by a 14% sequential increase in revenues. Fee generating AUM stood at $130.3B, up from $128.5B reported as of 1Q/14." RBC currently rates Apollo Management as Sector Perform, and has a $25.89 price target on the equity.