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What Could Affect Carlyle in 1Q18

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Substantial decline

Wall Street analysts expect The Carlyle Group (CG) to see EPS (earnings per share) of $0.54 in 1Q18, reflecting a substantial decline YoY (year-over-year). They gave a high estimate of $0.71 and a low estimate of $0.22. EPS are expected to fall mainly due to outflow from debt markets impacting its global credit segment.

Competitors (XLF) Ares Management (ARES), Brookfield Asset Management (BAM), and The Blackstone Group (BX) are expected to report EPS of $0.43, $0.16, and $0.73, respectively, in the March 2018 quarter. Carlyle’s management believes that generating lower returns is better than sitting on cash.

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Expected revenue decline

Analysts expect Carlyle to see revenue of $692.3 million in 1Q18, implying a decline YoY. They have given a high estimate of $810.4 million and a low estimate of $535.8 million. The revenue decline is expected mainly because of fewer buyout opportunities being available for private equity companies due to their higher valuation, resulting in more dry powder. Companies have seen their valuation increase with the introduction of US tax reform. According to Carlyle competitor Blackstone, making deployments, even at a higher valuation, is justified. However, sitting on cash can create a negative impression, possibly prompting private equity companies to make lower-return investments.

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