Blackstone Earnings: Shares Sell Off Despite Solid Results; Fair Value Estimate Remains at $165

Key Morningstar Metrics for Blackstone

• Fair Value Estimate: $165
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High

What We Thought of Blackstone’s Earnings

Blackstone BX ended September with $906.2 billion in fee-earning assets under management, up 2.2% sequentially and 10.5% year over year. Total revenue declined 15.7% year over year to $3.1 billion during the third quarter, with fee-related earnings increasing 26.0% to $1.5 billion.

Why it matters: Blackstone continues to generate positive flows as its mix of alternative products—through its real estate, private equity, multi-asset investing, and credit and insurance segments—benefits from ongoing demand for nontraditional products.

• The firm picked up $54 billion from fundraising efforts during the third quarter, above its quarterly run rate of $45 billion in the previous eight calendar quarters. Blackstone also deployed $27 billion during the period, below its quarterly run rate of $31 billion over the past two years but still solid on a year-to-date basis.
• Reported realizations of $31 billion were well above the quarterly run rate of $21 billion in the previous eight calendar quarters. Going forward, more-conducive capital markets should lead to great realizations, further supporting ongoing fundraising and deployment efforts.

The bottom line: With $1.242 trillion in total AUM, Blackstone remains the largest alternative asset manager in the world. Effective fundraising, deployment, and realization activity has allowed the firm to continue to grow organically, despite the more volatile market environment of late.

• As there was little in third-quarter results that would alter our long-term view of narrow-moat-rated Blackstone, we expect to leave our $165 fair value estimate in place.
• The shares are slightly undervalued relative to our fair value estimate, even after the selloff on continued market concerns about the private credit market. We recommend investors look for a 15% discount to our fair value estimate before considering the shares.