Blackstone Beats Estimates Despite Challenging Conditions

The Blackstone Group said Monday 2Q net income and revenue tripled; the private-equity buyout firm went public in June. Net income was $774.4 million, up from $224.1 million in 2006, and revenue rose to $975 million from $325 million. Economic net income after taxes (which excludes some compensation costs) rose to $515 million ($0.46/share) from $118 million ($0.11). On that basis, EPS beat analyst estimates of $0.34. "Throughout much of the second quarter, the operating environment was fundamentally positive, with global equity markets approaching near-record levels and the global economy, particularly in the U.S., remaining healthy. Concerns over weakness in the U.S. housing market and sub-prime mortgage market, coupled with a large volume of debt financing backlog related to leveraged equity transactions, served to create more challenging financing conditions starting in the last week of the quarter, which continue to date," the company said in a press release (see full earnings transcript later today). "It's the most visible private-equity firm out there and it's a whipping boy one day and the best boy on the block the next," said Paul Schaye of Chestnut Hill Partners. "We're seeing a squeeze on the debt markets and that changes the economics." Shares are down 27.9% since Blackstone's IPO, and are up 3.7% in pre-market trading.

Sources: Press release (.pdf), Bloomberg, MarketWatch
Commentary: Blackstone Is A Dog • Private Equity Returns: You May Do Better With Treasuries
Stocks/ETFs to watch: BX. Competitors: APOL, GS, MER, MS

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