Blackstone Beats by a Penny

The Blackstone Group (BX - Analyst Report) reported fourth quarter 2011 economic net income (ENI) of 40 cents per share, a penny ahead of the Zacks Consensus Estimate of 39 cents. However, this compares unfavorably with economic net income (ENI) of 46 cents in the year-ago quarter.

Blackstone’s results primarily benefited from lower expenses and higher net gains from fund investment activities. Growth in assets under management (AUM) was also among the positives during the quarter. However, lower revenues were the downside.

Blackstone reported ENI of $450.0 million for the fourth quarter compared with $512.7 million in the year-ago quarter. The decline in ENI was primarily attributable to lower performance fees and investment income.

For the full year 2011, ENI came in at $1.28 per share, surpassing the Zacks Consensus Estimate of $1.22. This also compares favorably with the loss of 3 cents in the previous year.

Quarter in Detail

Blackstone’s total revenues were $915.1 million as against $1,084.0 million in the prior-year quarter. The downside in revenues was attributable to lower performance fees and lower investment income. Total revenues also missed the Zacks Consensus Estimate of $978.0 million.

For the full year, total revenues came in at $3.3 billion, up from $3.1 billion in the previous year. Revenues for the full year were almost in line with the Zacks Consensus Estimate.

Total expenses declined 15% year over year to $836.5 million in the reported quarter. The decrease reflects a significant reduction in employee compensation and benefit expenses, which was partially offset by a rise in general and administration expenses as well as higher interest expense.

Asset Under Management

Fee-earnings AUM totaled $136.8 billion as of December 31, 2011, up 25% over the prior-year period. As of December 31, 2011, total AUM stood at $166.2 billion, up 30% from $128.1 billion as of December 31, 2010. Strong growth in AUM was driven by strong net inflows during the last year.

Capital and Liquidity

As of December 31, 2011, Blackstone had $1.6 billion in cash, treasury cash management strategies and liquid funds. Furthermore, the company had no borrowings outstanding against its $1billion revolving credit facility, which expires in April 2016.

Dividend Update

Concurrent with the earnings release, Blackstone announced a 120% increase in its quarterly distribution to 22 cents per unit. This distribution will be paid on March 30, 2012 to stockholders record as of March 15, 2012.

Our Take

Although concerns over the sluggish economic recovery persist, Blackstone will continue benefiting from the growing need for risk management and alternative investment solutions within the financial service industry.

Currently, Blackstone retains a Zacks #2 Rank, which translates into a short-term ‘Buy’ rating.

Blackstone’s competitor – Brookfield Asset Management Inc. (BAM - Snapshot Report) currently retains a Zacks #1 Rank (short-term ‘Strong Buy’ rating).