Blackstone Fourth Quarter Profits Jump 43%; AUM Up 26%

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The Blackstone Group L.P. (NYSE:BX) reported stronger-than-expected fourth quarter earnings on Thursday. The alternative investment giant’s earnings rose 43 percent from a year earlier to $670 million. Blackstone Group CEO, Stephen A. Schwarzman, said all the company’s business units showed gains for the quarter. For the full year, earnings grew 30 percent to $2 billion in 2012.

Blackstone Fourth Quarter Profits Jump 43%; AUM Up 26%

The Blackstone Group L.P. (NYSE:BX) reports its quarterly profits as economic net income, which includes unrealized gains from investments. It amounted to 57 cents per share for the fourth quarter, exceeding analysts’ estimate of 47 cents a share. Distributable earnings surged 177 percent to $493.8 million. The company’s asset under management increased 26 percent during the fourth quarter to $210.2 billion.

The Blackstone Group L.P. (NYSE:BX) co-founder and chief executive, Schwarzman, praised the results as the company’s best since it went public over five years ago. “We’ve generated consistently strong investment performance for our limited partner investors across market cycles since our inception 28 years ago, and 2012 was no exception,” he said. There were rumors that the private equity firm may be interested in Dell Inc., but Blackstone denied those rumors a few days ago.

The profits were driven by higher than expected growth in advisory fees and performance fees. Advisory fees rose 27 percent, while performance fees climbed 31 percent. Total revenues for the quarter went up 33 percent to $1.23 billion, compared to analysts’ estimate of $1.11 in revenues. Net expenses also increased 23 percent to $542.7 million during the quarter.

The acquisition and IPO-related charges were $317.5 million for the fourth quarter, compared to $147.8 million in the same period a year ago. For the full year, Blackstone saw $34 billion in capital inflows and returned $18 billion to investors. Blackstone said its hedge fund business was the strongest performer, where earnings rose 163 percent, followed by its private equity arm, which posted 86 percent increase in profits. However, its biggest unit, real estate, witnessed 2 percent decrease in profits.

Morgan Stanley (NYSE:MS), which maintains an Overweight rating with $20 price target for Blackstone stock, said in a research report that Blackstone is the best pick among U.S. asset managers. Matthew Kelley, senior analyst at Morgan Stanley, said Blackstone’s strong organic growth will continue and it will boost net fee related earnings and the stock’s “floor value.”

Morgan Stanley estimates a 34 percent year-on-year increase in net-fee related earnings. The fee-paying asset under management is expected to growth 14 percent in 2010-2015. Analysts expect Blackstone to pay 6 percent dividend yield in 2013 as realizations pick up.

The Blackstone Group L.P. (NYSE:BX) shares surged surged 6.07 percent to $18.50 in the trading session this morning.

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