Kohlberg Kravis Roberts, also known as KKR & Co. L.P. (NYSE:KKR), announced a 22 percent rise in its fourth quarter profits on Thursday. The investment firm’s net income was $347.7 million or 48 cents per share for the period, compared to $285.5 million in the same period a year ago. Analysts polled by Capital IQ were expecting 20 cents per share in earnings.

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KKR’s profitable exits from a number of investments delivered record flow of cash. The company said all of its business units showed strong gains. KKR co-founders Henry Kravis and George Roberts said in a statement that the company’s balance sheet and private equity portfolio both appreciated by 24 percent in 2012. The private equity firm outperformed S&P 500 (INDEXSP:.INX) by 7 percent. The value of its investments surged 4 percent in the fourth quarter.

Total distributable earnings rose about four times to $546.3 million in Q4 of 2012 from $146.5 million in the same period of 2011. For the year, the company earned $2.1 billion. Cash-outs booked in Q4 included share sale in Dollar General Corp. (NYSE:DG), dividend payment and sale of shares at HCA Holdings Inc (NYSE:HCA), divestment of semiconductor firm Avago Technologies Ltd (NASDAQ:AVGO) and chemical producer Rockwood Holdings, Inc. (NYSE:ROC).

Improvement in markets have benefited private equity firms by increasing the value of their holdings. Last Week, Blackstone Group L.P. (NYSE:BX) announced a 43 rise in its fourth quarter earnings. KKR’s total asset under management jumped from $66.3 billion in the third quarter to $75.5 billion at the end of fourth quarter, mainly due to the acquisition of hedge fund manager Prisma Capital Partners LP.

KKR & Co. L.P. (NYSE:KKR) returned more than $9 billion to private equity investors in 2012. The company will distribute 70 cents per common unit in the fourth quarter.

Bank of American Merrill Lynch maintain a Buy rating on KKR with a $20 price target. The price target is based on the result of sum-of-the-parts (SOTP) analysis. BAML values the fee-related earnings at $4/unit, the principal investments and accrued carry at $8/unit, and the discounted value of the investment income and future carry income at $8 per unit. That adds up to $20 per unit.

However, they noted some issues in the quarter:

1) Higher expenses (+12%, mainly in Private, while Public driven by Prisma) drove ~400bps of sequential FRE margin pressure; 2) Incentive fees lower q/q as expected; 3) Public Mkt redemptions ($170M); 4) Asia II fundraising appears stalled at $4B (expecting update), though fundraising was strong overall; 5) Lower tax rate benifit (3%); & 6) Unit count creep.

KKR & Co. L.P. (NYSE:KKR) shares were down 1.97 percent to $17.43 in New York trading.