The Blackstone Group ( BX - Analyst Report ) reported first quarter 2012 economic net income (ENI) of 39 cents per share, missing the Zacks Consensus Estimate of 42 cents. This also significantly fell short of 51 cents in the year-ago quarter.

Results declined due to the shrinking top line, which were, to some extent, softened by lower expenses. Despite the disappointing results, sturdy improvement in assets under management (AUM) was a huge respite.

Blackstone’s reported ENI of $432.3 million for the first quarter was down 24% from $571.0 million in the year-ago quarter. The fall was primarily attributable to depleted carrying value of assets, which was partially mitigated by higher management and advisory fees.

Quarter in Detail

Blackstone’s total revenue dipped 17% to $952.0 million from $1,153.3 million in the prior-year quarter. This also compares unfavorably with the Zacks Consensus Estimate of $1,003 million. The downside was driven by a substantial decline in performance fees and investment income during the quarter. However, these negatives were slightly toned down by a surge in net management and advisory fees.

Total expenses dropped 21% year over year to $783.8 million in the reported quarter. The fall was primarily due to a sizeable cut in employee compensation and benefits expenses, which was partly offset by a rise in general and administration expenses as well as fund expenses.

Asset Under Management

Fee-earnings AUM totaled $156.3 billion as of March 31, 2012 compared with $124.0 billion as of March 31, 2011. As of March 31, 2012, total AUM stood at $190.1 billion, up 30% from $150.0 billion as of March 31, 2011. Resilient acceleration in AUM resulted from strong net inflows along with investment growth during the quarter.

Capital and Liquidity

As of March 31, 2012, Blackstone had $1.1 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 quarterly distribution of 10 cents per unit. This distribution will be paid on May 31 to stockholders of record as of May 15.

Our Take

Investment appreciation in Blackstone along with the growing need for risk management, and alternative investment solutions within the financial service industry are expected to contribute positively to the company over the long run. Nevertheless, the company’s poor performance combined with the persistent sluggish economic recovery will continue to put its financials under pressure.

One of the peers of Blackstone, Brookfield Asset Management Inc. ( BAM - Snapshot Report ) is expected to announce its first quarter 2012 results on May 10.

Currently, Blackstone retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.