Blackstone Profit Tops Estimates on Buyout, Property Gains

(Bloomberg) -- Blackstone Group LP, the world’s largest private equity firm, said fourth-quarter profit rose 4.8 percent as holdings appreciated amid widespread market gains.

The firm’s unrealized and realized gains, known as economic net income, rose as both private stakes and holdings in public companies gained. The results, which can be hard to predict given their weighting toward closely held assets, topped analyst estimates.

Distributable earnings, which reflect cash profits on asset sales and fund management fees, jumped 94 percent as the firm sold off one of its largest European real estate assets, among other disposals.

Blackstone shares rose 1.8 percent in pre-market trading Thursday. The stock has gained 14 percent this year through Wednesday.

Led by Chief Executive Officer Steve Schwarzman, Blackstone has been pushing into new business lines as it looks to become a one-stop shop for investors. In the past three months, the firm established a group to manage more than $22 billion of insurance assets and continued ramping up its infrastructure investing team. The new insurance business and the integration of energy investor Harvest Fund Advisors helped drive a record $108 billion of inflows in 2017.

On Tuesday, its private equity group sealed its biggest deal by enterprise value in more than a decade, agreeing to buy Thomson Reuters Corp.’s financial and risk unit in a $17 billion transaction. The deal comes on the heels of a record deployment year for Blackstone, having put $50.7 billion to work throughout 2017.

“We believe this solid pace of deployment will carry forward into 2018 as Blackstone more actively deploys capital in its newer products and outside of the U.S.,” Credit Suisse Group AG analysts led by Craig Siegenthaler wrote in a note to clients after the earnings report.

Here’s a summary of key numbers from the results:

  • ENI for the quarter was 71 cents a share, compared with 68 cents a year earlier. Analysts were expecting 68 cents on average in the most recent quarter, according to 14 estimates compiled by Bloomberg.
  • Blackstone’s private equity portfolio appreciated 6.8 percent during the quarter, exceeding the 6.6 percent rise, including reinvested dividends, in the S&P 500 index of large U.S. companies. Its opportunistic real estate holdings rose 5.2 percent.
  • Distributable earnings were $1.2 billion versus $639 million a year ago. Drivers included the $2 billion disposal of vehicle-parts distributor Alliance Automotive Group and the 12.3 billion-euro ($15.3 billion) sale of European logistics company Logicor, the largest private exit in the real estate fund’s history.
  • The firm will draw on distributable earnings to pay shareholders a dividend of 85 cents a share on Feb. 20.
  • Blackstone managed $434.1 billion across private equity, real estate, credit and hedge funds as of Dec. 31.

Apollo Global Management LLC also reported results Thursday, topping the highest of analyst estimates. KKR & Co. and Carlyle Group LP are scheduled to report fourth-quarter results next week.

Peter Grauer, chairman of Bloomberg LP, is a non-executive director at Blackstone.

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