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A Look at KKR & Co.’s 3Q17 Results

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Part 5
A Look at KKR & Co.’s 3Q17 Results PART 5 OF 6

Why KKR Discounted Its Valuations after Its 3Q17 Results

One-year forward price-to-earnings ratio

KKR & Co. (KKR) has a one-year forward price-to-earnings ratio of ~8.1x, which represents a discounted valuation. KKR’s competitors’ average one-year forward price-to-earnings ratio stood at ~11.0x.

KKR’s competitors Carlyle Group (CG), Apollo Global Management (APO), and Blackstone Group (BX) have one-year forward price-to-earnings ratios of ~8.1x, ~12.8x, and ~12.3x, respectively.

Why KKR Discounted Its Valuations after Its 3Q17 Results

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KKR’s lower valuations mostly resulted from lower appreciation in its Private Equity portfolio in 3Q17 compared to 3Q16. The company could witness a marginal rise in its valuation in the upcoming months.

In 3Q17, KKR reported distributable earnings (or DE) after tax of $464.5 million on the back of realizations in its Private Markets division. However, KKR reported after-tax DE of $461.5 million in 3Q16.

In 3Q17, KKR reported assets under management (or AUM) of $153.0 billion, which reflects an increase of 17% on a year-over-year basis.

Capital Markets division

KKR & Co.’s Capital Markets division reported a strong performance in 3Q17. The division reported revenues of $85.4 million in 3Q17 compared to $47.4 million in 3Q16. This increase resulted from a rise in the division’s transaction fees.

Price-to-earnings ratio

KKR & Co. has a price-to-earnings ratio of ~8.7x on a trailing-12-month (or TTM) basis. Its peers in the alternative asset manager (XLF) space reported the following price-to-earnings ratio on a TTM basis:

  • Blackstone Group (BX): ~15.1x
  • Carlyle Group (CG): ~52.5x
  • Apollo Global Management (APO): ~12.6x
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