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Asset Growth to Aid Blackstone’s (BX) Q2 Earnings Amid Crisis

Blackstone BX is scheduled to report second-quarter 2020 results on Jul 23, before the opening bell. Its revenues and earnings are likely to have declined in the quarter on a year-over-year basis.

In the last reported quarter, the company’s earnings lagged the Zacks Consensus Estimate. Results were primarily hurt because of an increase in expenses. However, growth in revenues and assets under management (AUM) balance were positives.

Blackstone has an impressive earnings surprise history. Its earnings have surpassed the Zacks Consensus Estimate in three and lagged in one of the trailing four quarters, the average surprise being 5.3%.

Blackstone Group IncThe Price and EPS Surprise

Blackstone Group IncThe Price and EPS Surprise

Blackstone Group IncThe price-eps-surprise | Blackstone Group IncThe Quote

However, business prospects and activities of the company in the second quarter failed to win analysts’ confidence. As a result, the Zacks Consensus Estimate for its earnings of 43 cents for the quarter has been unchanged over the past seven days. The figure indicates a decline of 24.6% from the prior-year quarter’s reported number.

The consensus estimate for sales for the to-be-reported quarter is pegged at $1.12 billion, which suggests a decline of 15.1% from the year-ago quarter’s reported figure.

Now, let’s check the factors that are expected to have influenced the company’s second-quarter performance.

Key Factors to Note

Blackstone has been witnessing a rise in fee-earning AUM and total AUM for the past few years on the back of its diversified products and revenue mix, superior position in the alternative investments space, and net inflows. Moreover, despite an overall challenging operating backdrop, the same trend is likely to have continued in the to-be-reported quarter.

Owing to the continued uncertainty resulting from the coronavirus outbreak, the second quarter recorded a significant rise in market volatility and higher client activity. Moreover, unlike the first quarter, the second quarter mainly witnessed asset inflows. Thus, driven by net inflows, the company is expected to have recorded an increase in AUM in the quarter.

Notably, the Zacks Consensus Estimate for net management and advisory fees (segment revenues) for the to-be-reported quarter is pegged at $949 million, which indicates growth of 1% from the prior quarter’s reported number.

However, the consensus estimate for fee-related performance revenues (segment revenues) of $12.28 million suggests a decline of 1.5% sequentially.

Blackstone’s expenses have remained elevated over the past few years mainly because of higher general, administrative and other expenses. As the company continues to make investments in franchise, expenses are expected to have risen to some extent in the second quarter as well. However, due to a fall in overhead expenses (because of most people working from home), overall costs are expected to have remained manageable.

Here is what our quantitative model predicts:

According to our quantitative model, chances of Blackstone beating the Zacks Consensus Estimate this time are high. That is because it has the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Blackstone is +1.26%.

Zacks Rank: The company currently carries a Zacks Rank #3.

Other Stocks That Warrant a Look

Here are some other finance stocks that you may want to consider as these too have the right combination of elements to post an earnings beat in their upcoming releases, per our model.

Associated BancCorp ASB is slated to release quarterly results on Jul 23. The company currently has an Earnings ESP of +7.31% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

East West Bancorp, Inc. EWBC is scheduled to report quarterly earnings on Jul 23. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +3.47%.

SVB Financial Group SIVB is also set to report quarterly earnings on Jul 23. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +6.71%.

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Blackstone Group IncThe (BX) : Free Stock Analysis Report
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