The Blackstone Group L.P. (BX) reported fourth-quarter 2014 economic net income (ENI) of $1.25 per share, significantly outpacing the Zacks Consensus Estimate of 95 cents. However, the figure came in 7% lower than the prior-year quarter figure.
For full-year 2014, ENI per share stood at $3.76, up 22% year over year. Moreover, this surpassed the Zacks Consensus Estimate of $3.43.
Better-than-expected results were aided by reduction in expenses. Moreover, steady improvement in assets under management (AUM) and an improved balance sheet continued to impress. However, pressurized top line was a downside.
Blackstone reported ENI of $1.45 billion, down 6% year over year. For 2014, ENI came in at $4.34 billion, up 24% year over year.
Behind the Headlines
Total revenue (GAAP basis) declined 25% year over year to $2.02 billion. The fall was mainly attributable to lower performance fees (down 22%) and total investment income (down 97%). These were, however, partly offset by an increase in other revenues (up 69%), interest and dividend revenue (up 22%) and net management and advisory fees (up 10%). However, it came above the Zacks Consensus Estimate of $1.99 billion.
For 2014, total revenue (GAAP basis) climbed 13% year over year to $7.5 billion. Moreover, it beat the Zacks Consensus Estimate of $6.8 billion.
Total expenses (GAAP basis) plunged 45% year over year to $607.2 million. The decline in expenses was primarily driven by a reduction in compensation and benefits costs, partly offset by higher general, administrative and other expenses, interest expense as well as fund expenses.
Fee-earnings AUM grew 9% year over year to $216.7 billion. Total AUM as of Dec 31, 2014 amounted to $290.4 billion, up 9% year over year. The rise in total AUM was primarily driven by $24.5 billion of market appreciation across all segments and $56.9 billion of gross inflows.
As of Dec 31, 2014, Blackstone had $3.4 billion in cash, corporate treasury and liquid investments. Moreover, the company had $2.1 billion as long-term debt at the end of the quarter.
Our Viewpoint
Going forward, improving economic conditions are expected to assist Blackstone’s fund-raising ability. Also, the changing investor preference for alternative asset classes and other risk management strategies will boost the top line in the forthcoming quarters. Further, we foresee steady improvement in AUM, backed by continued inflows in all the segments.
However, we remain concerned about the adverse effect of the ongoing capital market volatility and stringent regulations. These factors could weigh on the company's financial performance in the near term.
Currently, Blackstone carries a Zacks Rank #4 (Sell).
Among other investment mangers, Waddell & Reed Financial, Inc. (WDR) and Apollo Global Management, LLC (APO) are scheduled to announce their fourth-quarter 2014 earnings results on Feb 3 and Feb 5, respectively, while Franklin Resources Inc. (BEN) is slated to release first-quarter fiscal 2015 results on Jan 30.
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