Blackstone Group LP (NYSE:BX) reported overall results that were better than expected, led by robust returns, strong investing and realization activity, but softer fundraising. Following the quarter, Credit Suisse reiterates its Outperform rating, with the firm's long-term thesis still intact: BX is undervalued versus its dividend potential, and the firm expects its valuation to improve over the next five years (C-corp conversion could help). BX is in a secular growth phase – with alts stealing market share from the traditionals, and more concentrated flows going to the largest alternative managers like BX (LPs are consolidating their managers). Credit Suisse also thinks BX is well levered to a stronger US and European economic backdrop, as stronger GDP would translate into higher returns across its portfolio companies (and higher p-fees).
1Q17 results included strong returns (ENI of $0.82 vs. $0.68 consensus), and DE / div well above the consensus ($0.87 vs. $0.66 consensus div). Also, BX deployed $11.7B of capital (above Credit Suisse's forecast $10.2B) and raised $14.0B of capital (vs. its est. $15.5B).
The firm increased its 2Q17 / 2017 ENI estimates to $0.76 / $3.48 from $0.72 / $3.45, but decreased its dividend distribution forecasts to $0.44 / $2.48 (from $0.52 / $2.58). Credit Suisse’s normalized cash EPS derived TP (12mo) decreases to $39 (from $40), which embeds a 36% total return (includes the 8% dividend). Risks include softer than expected fundraising, lower returns, and slower economic growth.