Apollo Disappoints on Earnings, AUM Declines to $113 Billion

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Apollo Global Management LLC (NYSE:APO) posted ENI of $0.50 for the second quarter, which beat the $0.43 estimate of Citi Research, but was below the consensus estimate of $0.52. However, a strong realization picture helped to beat the quarterly distribution estimate of $1.16, and came in at $1.32, bringing yield to date (YTD) at $1.89 and improving further potential for the company, says a report from Citi Research y analysts William R Katz, Neil Stratton and Steven J Fullerton.

Apollo Disappoints on Earnings, AUM Declines to $113 Billion

Segment wise performance for Apollo Global Management LLC (NYSE:APO)

Revenues from the management business for Apollo Global Management LLC (NYSE:APO) came in at $245 million compared to the forecast of $207 million. The impressive performance of the segment was mainly due to higher than expected advisory/transaction fees while the management fees of $169 million was in line with the expectations.

For the quarter, carried interest was $266 million, which beat the analyst’s estimate of $222 million, primarily due to higher NAVs as the PE portfolio was up 5 percent against the 3-4 percent estimate.

AUM declines but in line with estimates

At the end of the second quarter, total assets under management (AUM) was $113 billion, which was a decline of 1 percent quarter over quarter, and was in line with the estimate from Citi analysts, but “paced by higher fundraising against equally higher.”

Analysts believe “lead indicators” are strong as Apollo Global Management LLC (NYSE:APO) raised $8.4 billion to date for Fund VIII. As on June 30, FPAUM were $79 billion a decline of 3 percent quarter over quarter mainly due to distribution and net change in leverage.

Shares are price sensitive

Based on the results and post call commentary, analysts believe that Apollo Global Management LLC (NYSE:APO) is “is dually navigating both the favorable realization but slightly more difficult deployment backdrops well, in contrast to more uneven discussion elsewhere.”  Shares of the company are up reflecting YTD, but also the stock is a bit price sensitive.

Citi ups ENI estimate

Citi analysts raised the ENI estimate, for 2103 by $0.66 to $4.32, backed by strong performance in the second quarter and “above trend QTD markets.” For 2014, ENI is expected to be $2.91, which is same as the earlier estimate. However, for 2015, analysts lowered the estimate from $2.89 to $2.71 due to “Athene related advisory revenue drop off 4Q14.”

Apollo Global Management LLC (NYSE:APO) had a good third quarter so far with QTD net realized carry of $0.56. Also, management of the company is optimistic on all segments, expecting the market currently favors more of selling than buying. Analysts expect above average distributions compared to peers, owing to impressive performance of the recent IPOs.

Though the overall environment looks challenging, analysts believe that Apollo Global Management LLC (NYSE:APO) with its differentiated investment approach will be able to make efficient use of capital. Citi analysts affirm their Buy rating on the stock and give a 12-month price target of $30.

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