Apollo Global Management posted a very dismal fourth quarter earnings. Apollo’s revenue dropped 52%, profit fell to $11 million, a 95% drop in profit. The company reported a $0. 80 cents per share net income but Wall Street wanted $1.41. Apollo CEO, Leon Black tried stay positive after the results, saying “2011 was an outstanding year”. For the entire fiscal 2011, Apollo posted a $469 million loss.
Apollo’s earnings come after other private equity firms have been taking large losses as well such as Blackstone’s less than flattering results and KKR’s 74% earnings dive yesterday. These earning reports have made people start wondering if private equity can continue in this marketplace and be profitable.
It should be noted that these private equity firms did not post these awful numbers due to investors leaving the scene and getting their money out. In fact, the total assets under management for Apollo increased 11% from last year and an overall 40% since 2009. In KKR’s case, analysts said that there were very good aspects of the firm’s 74% earnings miss and shares rose.
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Private equity has been taking some heat after Republican Presidential candidate; Mitt Romney disclosed his past work with Bain Capital. Since then, firms that deal with hostile takeovers or any kind of takeover have been taking harsh criticism from the people. Romney’s Bain Capital has been a huge target for the other candidates such as Newt Gingrich. Despite Mr. Romney’s past with private equity, I would be a little worried about the private equity industry right now. Three very well known and powerful PE firms just reported very huge losses. On top of that, you would think that this would rally analysts to say that there is something going very wrong with the industry right now and maybe downgrade the stocks. Instead they looked at KKR’s 74% miss and said there were bright spots and shares rallied.
Unfortunately, I do not see how a miss like that can warrant you to say that there was “bright spots” in the report. The overall report said the firm lost a significant chunk of its profit. What is so bright about that? If you own KKR, Blackstone or Apollo I would consider this as a warning and that it might be time to jump ship while analysts are trying to look for the good in the reports instead of looking at the overall loss.