Why Is Blackstone (BX) Down 7.8% Since The Last Earnings Report?

It has been about a month since the last earnings report for The Blackstone Group L.P. (NYSE:BX) . Shares have lost about 7.8% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Blackstone’s Q2 Earnings Miss Estimates, Revenues Up

Blackstone reported second-quarter 2017 economic net income (ENI (MI:ENI)) of $0.59 per share, which lagged the Zacks Consensus Estimate of $0.62. However, the figure compared favorably with $0.44 recorded in the prior-year quarter.

An increase in expenses hurt results. However, the quarter witnessed a rise in revenues. Also, growth in assets under management (AUM) continued to impress.

For the quarter, Blackstone reported ENI of $705.4 million, reflecting an increase 36% year over year.

Revenues & Costs Rise

Total revenue (GAAP basis) increased 30% year over year to $1.55 billion, primarily driven by a rise in performance fees as well as interest and dividend revenues. Also, the top line handily surpassed the Zacks Consensus Estimate of $1.49 billion.

Total expenses (GAAP basis) increased 24% year over year to $885.1 million. The increase was primarily due to a drastic increase in fund expenses.

Fee-earning AUM grew 6% year over year to $281.9 billion. Total AUM amounted to $371.1 billion as of Jun 30, 2017, up 4% year over year. The rise in total AUM was largely driven by $57.4 billion of inflows.

As of Jun 30, 2017, Blackstone had $5 billion in total cash, cash equivalents and corporate treasury investments.

Outlook

Management now expects fee related earnings (FRE) to grow at mid teens in 2017, up from the prior guidance of low double-digit percentage growth.

Moreover, management expects to see improvement in performance fees in 2018.

Over the long term, the company’s weighted average management fee is likely to remain stable.

Further, from a DE perspective, management remains confident about its FRE trajectory and realization pipeline, and performance fee momentum in 2017.

Management expects low double-digit AUM growth and high-single-digits to low-double-digits growth in fee-earning AUM to continue.

Driven by safety and high returns, management expects its alternative class to continue growing in the near term.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

The Blackstone Group L.P. Price and Consensus

The Blackstone Group L.P. Price and Consensus | The Blackstone Group L.P. Quote

VGM Scores

At this time, Blackstone Group's stock has a poor Growth Score of F, however its Momentum is doing a lot better with a C. Following the exact same course, the stock was allocated also a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for value and momentum investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.