By Bill Alpert
After a rough year with its real estate portfolio, asset management giant Blackstone finished its December quarter in better form than Wall Street expected.
Blackstone’s December earnings of $1.11 a share were 4% above the year-ago quarter and about 15% better than forecasts. For the year, earnings fell 24%, to $3.95 a share. Yet over $1 trillion worth of assets were under its management, up 3% from September and 7% from 2022. The stock was up 3% by midday on the news, to $124.
But the stock’s handsome multiple of 24-times rides largely on hopes that all the money Blackstone is managing will throw off fees. And the quarter’s fee-related earnings of 86 cents a share were a disappointment, slipping 2%. Much of the earnings beat came from factors like lower taxes and interest income.
The firm’s stalling management fees put pressure on the company in 2024 to show that Blackstone’s asset gathering will accelerate its fee income, wrote Wells Fargo analyst Finian O’Shea. He rates the shares at Overweight, but there’s just 5% upside to his $130 price target.
A third of the assets overseen by Blackstone are in real estate, and vehicles like its unlisted Blackstone real estate trust suffered declines and redemptions through the year. Returns in the firm’s real estate holdings slipped about 4% in the quarter — offset by gains of about 4% in private equity and private credit.
On Thursday’s conference call, Blackstone executives pointed out that with the firm’s strong inflows, a number of its funds have temporary holidays on fee charges. The company said it has confidence that fee income will grow this year.
Write to Bill Alpert at william.alpert@barrons.com