Earnings momentum for The Blackstone Group LP (BX) has been rising since this asset management company reported solid third quarter results in mid October, which included a positive surprise of 31.0%. This Zacks #1 Rank (Strong Buy) has beaten quarterly earnings estimates in three of the last four quarters with an average beat of 18.1%. Blackstone has an expected long-term earnings growth rate of 19.6% and pays a dividend that yields 2.62% annually. Moreover, with a P/B multiple of just 0.68, this stock is an attractive pick for value investors. Impressive Q3 Results On Oct 18, Blackstone Group reported third quarter earnings of 55 cents per share, outpacing the Zacks Consensus Estimate by 31.0% and reversing the year-ago loss of 34 cents. The better-than-expected results were due to significant top-line growth, partly offset by higher expenses. Total revenue jumped to $1,223.1 million from a loss of $124.1 million in the prior-year quarter. The improvement was attributable to solid increases in total performance fees, total investment income, interest and dividend revenue, as well as other revenue. Total expenses spiked 57.4% year over year to $851.4 million, primarily driven by a sizeable rise in compensation and benefits expenses. As of Sep 30, fee-earnings AUM advanced 26.9% year over year to $168.6 billion, due to $43 billion of gross inflows, partly offset by $11 billion of capital deployment activities. Earnings Estimates Rising Over the past 60 days, the Zacks Consensus Estimate for 2012 advanced 1.9% to $1.61 per share, as 9 of 11 estimates moved north. This implies year-over-year growth of 31.4%. Valuation Looks Attractive Along with an attractive P/B multiple, Blackstone Group has a forward P/E ratio of 9.3 (a P/E ratio under 15.0 and P/B ratio below 3.0 generally indicate value). Moreover, the company has a trailing 12-month ROE of 15.2%, compared with the peer group average of 10.5%. This implies that the company reinvests its earnings more efficiently than its industry peers. Given the long-term growth projection of 19.6%, the PEG ratio comes in at 0.47, a 53.0% discount to the benchmark of 1 for a fairly priced stock. Therefore, the expected long-term earnings growth is presently priced at a discount. Blackstone currently enjoys a dividend yield of 2.62%. So, in addition to being a value stock, the company offers a steady income opportunity. Headquartered in New York, The Blackstone Group LP is an asset manager of alternative investments and a provider of financial advisory services. Founded in 1985, the company has offices in all major countries. The company has a market cap of approximately $6.48 billion. Other Zacks #1 Rank (Strong Buy) asset management firms include AllianceBernstein Holding L.P. (AB) and Virtus Investment Partners, Inc. (VRTS).
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