On Friday, CFRA raised its rating on shares of Ares Management, L.P. (NYSE:ARES) from Hold to Buy and increased the price target to $155 from $140. The firm cited the company's position as a leading alternative asset manager in private credit and adjusted the target based on a forward P/E of 26.3x their 2025 earnings per share (EPS) estimation. This valuation represents a premium compared to the 24.2x three-year historical average.
The firm maintained its 2024 EPS forecast for Ares Management at $4.30 and lifted the 2025 EPS prediction by $0.50 to $5.90, slightly below the consensus of $6.00. Ares Management reported a Q2 2024 EPS of $0.99, which was $0.01 higher than the consensus estimate.
The company experienced a year-over-year increase of 17% in management fees. The total assets under management (AUM) reached $447.2 billion, marking an 18% increase, with fee-paying AUM growing by 14% to $276 billion.
Ares Management's AUM is distributed across various segments, with Credit holding the largest share at $323.1 billion, which is 72% of the total AUM. Real Assets accounted for $67.7 billion or 15%, Private Equity was at $24.6 billion or 6%, and Secondaries/Other made up $31.8 billion or 7%. During Q2, the company raised $26.0 billion, with the largest inflows seen in Credit, which represented 77% of the total. Real Assets contributed 16%, Secondaries 3%, and Other/Insurance 4%.
The firm also highlighted Ares Management's available capital, also known as dry powder, which stood at $70.8 billion, with total deployments equaling $26 billion in Q2. Perpetual capital increased to $116.3 billion, up from $99.5 billion, showing a 16.9% rise.
The company is expected to make dispositions in European funds later in 2024. CFRA expressed a positive view on the $83.2 billion of Ares Management's AUM that is not yet generating fees, noting that some funds will begin to pay fees sooner than anticipated.
In other recent news, Ares Management Corporation closed its largest direct lending fund, Ares Senior Direct Lending Fund III, with approximately $15.3 billion in equity commitments. This surpasses the initial target of $10 billion and sets a record for the firm. The fund has already committed $9.0 billion to over 165 companies.
In addition, Ares Management secured an additional $52.92 million from a recent stock sale, bringing the total net proceeds from its latest offering to approximately $408.21 million. This capital could support the firm's strategic initiatives and growth plans.
Regarding analyst notes, Jefferies updated Ares Management's price target to $139 and maintained a Hold rating. TD Cowen maintained a Buy rating with a price target of $168.00, highlighting the firm's potential for growth in areas requiring deal-making expertise. Deutsche Bank adjusted its rating on Ares Management to Hold from Buy, setting a new price target of $132.00, due to an error in the previous analysis.
Furthermore, Ares Management announced a public offering of 2,650,000 shares of its Class A common stock, intended to fund general corporate activities.
InvestingPro Insights
With the recent upgrade by CFRA and a target price set to $155, Ares Management (NYSE:ARES) shows interesting figures that could catch an investor's eye. According to InvestingPro data, Ares Management has a market capitalization of $44.25 billion and is currently trading at a P/E ratio of 61.62, which is high but reflects potential near-term earnings growth, as indicated by a PEG ratio of 0.69. The company's revenue growth over the last twelve months is at a solid 11.8%, showcasing its ability to expand financially.
InvestingPro Tips suggest Ares Management has been consistent with its dividend payments, raising them for 4 consecutive years, and maintaining them for 11 years, which could be appealing to income-focused investors. However, analysts have recently revised their earnings expectations downwards for the upcoming period. Yet, it's worth noting that the company has been profitable over the last twelve months and is predicted to remain profitable this year. For investors seeking more detailed analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/ARES.
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