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The Blackstone Group LP

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Earnings momentum for The Blackstone Group LP (BX - Free Report) has been rising since the asset management company reported solid third quarter results last week, which included an earnings surprise of 31.0%. This Zacks #2 Rank (Buy) has recorded positive earnings surprises in three of the last four quarters with an average beat of 18.1%. Moreover, BX pays a regular quarterly dividend that yields 2.62% annually.

Impressive Q3 Results

On October 18, Blackstone reported third quarter earnings of 55 cents per share, outpacing the Zacks Consensus Estimate by 31.0% and reversing the year-ago loss of 34 cents.

Total revenue substantially improved to $1,223.1 million from a loss of $124.1 million in the prior-year quarter. The improvement was attributable to a solid increase in total performance fees, total investment income as well as interest and dividend revenue, and other revenue. Total expenses spiked 57.4% year over year to $851.4 million, primarily driven by sizeable elevation in compensation and benefits expenses.

As of September 30, 2012, fee-earnings AUM advanced 26.9% year over year to $168.6 billion. The increase was attributable to $43 billion of gross inflows, partly offset by $11 billion of capital deployment activities.

Surge in Earnings Estimates

Over the past 30 days, the Zacks Consensus Estimate for 2012 advanced by 9.5% to $1.61, as 8 of 10 estimates were revised higher. For 2013, the Zacks Consensus Estimate is up 3.4% in the same timeframe to $2.13, as half of 12 estimates increased.

The estimates reflect year-over-year improvements of about 28.8% for 2012 and 32.3% for 2013.

Dividend Payment

Blackstone is one of the few financial firms that maintained regular dividend payments throughout the financial crisis. Currently, the company pays a quarterly dividend of 10 cents per share, affirming a yield of 2.62%.

Valuation Looks Attractive

Shares of Blackstone currently trade at 9.3x 12-month forward earnings, a 33% discount to the peer group average of 13.8x. Its price to book ratio of 0.68 is 39% below the industry median of 1.12. Moreover, the company has a trailing 12-month ROE of 15.4% compared with the peer group average of 10.1%.

Given the long-term growth projection of 19.6%, the PEG ratio comes in at 0.48, a 52.0% discount to the benchmark of 1 for a fairly priced stock. Thus, the expected long-term earnings growth is currently priced at a discount.

Chart Shows Strength

The stock has been consistently trading above its 50 days moving average since September 2012.

Blackstone is one of the few financial institutions with rising estimates, strong growth projections, a decent dividend yield and a reasonable valuation. Moreover, with a steady dividend payment and other capital deployment activities, it offers an attractive growth and income opportunity.

Headquartered in New York, Blackstone is an asset manager of alternative investments and a provider of financial advisory services. Founded in 1985, the company has offices in all major countries. With a market capital of approximately $6.25 billion, Blackstone competes with Franklin Resources Inc. (BEN), among others.

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