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Why Blackstone’s Valuations Could Ride On Realizations

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Increasing valuations

In 1Q17, Blackstone (BX) reported strong economic net income or ENI of $986 million, mainly due to appreciation in funds and growth in FRE or fee-related earnings. Blackstone’s current price-to-earnings ratio stood at 16.59x. Blackstone recorded higher valuations on the back of higher realizations in 1Q17. Its private equity and real estate divisions reported realizations of $6.2 billion and $6.7 billion, respectively, in 1Q17. Blackstone’s one-year forward price-to-earnings ratio stood at 12.01x, which is higher than its competitors’ average one-year forward price-to-earnings ratio of 9.0x. This difference is mainly due to expected realizations in the company’s real estate and private equity divisions in 2H17.

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Blackstone’s (BX) real estate division is likely to benefit from the sale of Logicor to China Investment Corporation. The company’s private equity division is likely to benefit from the acquisitions of EagleClaw Midstream Ventures and Ascend Learning. In 2H17, Blackstone’s distributions are expected to rise on the back of expected realizations in its private equity and real estate divisions.

Forward price-to-earnings ratio

Alternative asset managers (XLF) have a lower one-year forward price-to-earnings ratio than Blackstone (BX). Blackstone’s (BX) one-year forward price-to-earnings ratio stood at 12.01x. Its peers have the following one-year forward price-to-earnings ratios.

  • Apollo Global Management (APO): 10.43x
  • KKR & Co. LP (KKR): 8.73x
  • Carlyle Group (CG): 7.86x

Let’s now take a look at what Wall Street analysts’ have to say about Blackstone in the next part of this series.

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