On Sep 18, 2013, we reaffirmed our long-term Neutral recommendation on The Blackstone Group L.P. (BX - Analyst Report). Though the company reported strong second-quarter 2013 results, we remain concerned about the prevalent capital market volatility and the impact of stringent regulations on the company’s financial performance in the near term.
On Jul 18, Blackstone reported second-quarter 2013 economic net income (ENI) of 62 cents, substantially beating the Zacks Consensus Estimate of 52 cents. Results were aided by top-line growth, partially offset by higher operating expenses. Steady assets under management (AUM) and improved balance sheet were the other tailwinds for the quarter.
The Zacks Consensus Estimate for 2013 advanced 1.0% to $2.37 per share over the last 60 days. Further, for 2014, the Zacks Consensus Estimate increased 2.2% to $2.83 per share over the same time period. Hence, Blackstone currently carries a Zacks Rank #2 (Buy).
Blackstone’s diversified footprints across the globe, along with its strategically planned acquisitions will continue to boost top-line growth in the upcoming quarters. Fee-earning AUM and total AUM consistently showed strong growth, and constitute the company’s strength.
Moreover, at a time when most firms are undertaking cost reduction initiatives to lower operating expenses, Blackstone has been witnessing a decline in total expenses without resorting to such efforts.
However, increased dependence on primarily management and advisory fees could dent the company’s financials in the near term, if it witnesses any change in the managed assets, regulatory changes or a slowdown in business activities. Further, returns from investments are expected to remain slow in the near term due to sluggish economic recovery.
Other Stocks Worth Considering
Other stocks worth a look include GAMCO Investors, Inc. (GBL - Snapshot Report), Affiliated Managers Group Inc. (AMG - Analyst Report) and Ameriprise Financial, Inc. (AMP - Analyst Report). While GAMCO Investors carries a Zacks Rank #1 (Strong Buy), Affiliated Managers Group and Ameriprise Financial carry the same Zacks Rank as Blackstone.