Blackstone Earnings: Weak Operating Environment Offsets Triumph of Surpassing $1 Trillion in AUM
There was little in narrow-moat Blackstone’s BX second-quarter results that would alter our long-term view of the firm. We are leaving our $105 per share fair value estimate in place, and we view the shares as being fairly valued right now. Blackstone closed out the June quarter with $731.1 billion in fee-earning assets under management, or AUM, down 0.1% sequentially but still up 6.9% year over year. Total AUM finally surpassed the $1 trillion mark, as the company closed out the period with $1.001 trillion in assets, up 1.0% sequentially and 6.4% on a year-over-year basis.
Adjusted net outflows of $5.4 billion during the quarter—driven by a combination of weaker fundraising, weaker capital deployment, and elevated redemptions, specifically for Blackstone Real Estate Income Trust, or BREIT, and Blackstone Private Credit Fund, or BCRED—were not only well off the positive $28.2 billion quarterly run rate we’ve seen for flows the past two years but were the first adjusted net outflows for the firm since the second quarter of 2018, highlighting the difficult operating environment.
Total revenue (which includes the effects of unrealized activity) increased 347.3% year over year on higher levels of unrealized performance allocations (despite lower realized performance and principal investment gains). Management fee income was up 8.3% year over year during the second quarter and was up 10.4% during the first half, which was slightly better than our expectations for the full year.
Fee-related earnings (which measure profits from revenue received on a recurring basis and not subject to future realization events) of $1.1 billion during the June quarter were up 12.1% year over year. Distributable earnings, which remove the effects of unrealized activity, were $1.2 billion, or $0.93 per share, down from $2.0 billion, or $1.49 per share, in the second quarter of 2022. This was slightly better than the FactSet consensus estimate as well as our own estimate of $0.92 per share.
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