Blackstone Earnings: Weaker Capital Deployment and Increased Redemptions Affect Results
While there was little in narrow-moat Blackstone’s BX first-quarter results that would alter our long-term view of the firm, we expect to reduce our fair value estimate slightly to adjust for weaker flows and realizations in the near term than we projected. We view Blackstone as being moderately undervalued right now and envision the stock potentially getting a boost in the near term if it is added to the S&P 500 index (now that S&P Dow Jones Indices has relaxed its criteria to allow firms with more than one class of stock into its U.S. indexes).
Blackstone closed its first quarter with $732.0 billion in fee-earning assets under management, up 1.9% sequentially and 8.0% year over year. Adjusted net inflows of $11.8 billion during the March quarter—well off the $27.6 billion quarterly run rate of the past two years—were the result of weaker capital deployment and increased redemptions, especially for Blackstone Real Estate Income Trust and Blackstone Private Credit Fund, or BCRED.
Total revenue (which includes the effects of unrealized activity driven by mark-to-market adjustments) declined 73.0% year over year on lower levels of unrealized performance allocations and unrealized losses on principal investments. On a more positive note, management fee income was up 12.5% year over year despite pressure on fees as increased AUM levels and other fees bolstered results.
Fee-related earnings (which measure profits from revenue received on a recurring basis and not subject to future realization events) of $1.0 billion declined 9.3% year over year. Distributable earnings (which remove the effects of unrealized activity) were $1.2 billion, or $0.97 per share, for the March quarter, down from $1.9 billion, or $1.55 per share, in the prior-year period. This was slightly better than the FactSet consensus estimate of $0.96 per share.
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