On Friday, Citi updated its financial outlook on The Blackstone Group (NYSE: NYSE:BX), raising the price target to $170.00 from the previous $157.00, while keeping a Neutral stance on the stock. The revision follows Blackstone's third-quarter performance, which saw the company's stock climb by 6.3% after the earnings release.
The firm's Fee-Related Earnings (FRE) outperformed Citi's estimates, mainly due to Fee-Related Performance Fees (FRPF) and a lower tax rate. Blackstone's management expressed confidence in the company's portfolio positioning, anticipating an improved monetization environment by 2025. The analyst noted that healthy trends in fundraising and deployment activities are contributing to a positive outlook.
For the upcoming fourth quarter, it is anticipated that FRE will increase, bolstered by Blackstone Infrastructure Partners (BIP) crystallization and an approximate $40 million impact from funds that are starting to contribute. However, the FRE margin may experience a slight moderation due to Fee-Related Performance Revenue (FRPR) comparisons and seasonal operational expense pressures.
Citi has adjusted its earnings per share (EPS) estimates for Blackstone for the years 2025 and 2026 to $6.08 and $7.10, up from $6.03 and $6.87, respectively. These revisions are based on an updated fundraising outlook. The new price target of $170 implies forward price-to-earnings (P/E) ratios of 28x for 2024 and 24x for 2025.
While Citi acknowledges Blackstone's long-term potential, particularly in Permanent Capital Vehicles (PWC), insurance, and due to the firm's overall scale, the Neutral rating reflects a balanced view of the risks and rewards associated with the stock at its current level.
In other recent news, Blackstone reported a GAAP net income of $1.6 billion and distributable earnings of $1.3 billion in the third quarter of 2024. The firm's total assets under management (AUM) reached $1.1 trillion, marking a 10% increase year-over-year, and deployed $123 billion over the past year, doubling the previous year's comparable period. Blackstone also made significant strides in acquisitions, notably purchasing AirTrunk for $16 billion and becoming the world's largest data center provider.
These developments are part of recent events that have seen Blackstone's private credit business grow to $432 billion, with over $100 billion in inflows over the last year. The firm's private wealth channel also raised $21 billion year-to-date, nearly doubling the previous year's total. Despite rising operating expenses and potential delays in investment decisions due to the upcoming election, Blackstone anticipates continued growth and positive momentum across its business.
In an analysis from independent sources, Blackstone's robust investment performance was highlighted, with corporate private equity funds appreciating 6.2% in Q3 and 15% over the last year. The firm's insurance channel grew to $221 billion, up 24% year-over-year, and originated a record $38 billion in A-rated credits year-to-date. Looking ahead, Blackstone expects a significant increase in fee-related earnings in Q4 2024 and predicts a recovery in commercial real estate and increased M&A and IPO activity in 2025.
InvestingPro Insights
Recent InvestingPro data aligns with Citi's positive outlook on Blackstone Group (NYSE: BX). The company's market capitalization stands at an impressive $206.63 billion, reflecting its significant position in the asset management industry. Blackstone's revenue growth of 35.11% over the last twelve months and a robust 54.13% quarterly growth underscore the company's strong performance, supporting Citi's optimistic earnings projections.
InvestingPro Tips highlight that Blackstone's net income is expected to grow this year, corroborating Citi's upward revision of EPS estimates for 2025 and 2026. Additionally, the company has maintained dividend payments for 18 consecutive years, demonstrating financial stability and commitment to shareholder returns.
However, investors should note that BX is trading at a high P/E ratio of 54.96, which aligns with Citi's forward P/E projections. This valuation metric suggests that the stock may be priced for high growth expectations, which could explain Citi's Neutral stance despite the raised price target.
For those seeking a more comprehensive analysis, InvestingPro offers 15 additional tips on Blackstone, providing deeper insights into the company's financial health and market position.
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