Blackstone Group (BX) Beats, but Already Ran into Earnings

Blackstone Group (BX) has really turned into a daytraders field unfortunately. The stock made a massive move ahead of earnings and now is giving up some of it. I don't think this is so much an earnings story - more of a return to health of capital markets. At least that is how I am treating it... the company has a war chest of cash akin to Apple (AAPL) at $29 billion. (aka 1 tranche of federal AIG bailout or 29 cash for clunker programs). We don't have much of a position now but will look to add on a pullback.

I'm just going to pull the Reuters report up on the site for brevity, although there are a lot of nuggets within the actual press release here, and a quick summary of the conference call here.

• Private equity firm Blackstone Group (BX) reported a jump in second-quarter profit Thursday, topping Wall Street expectations, and said it was sitting on its biggest cash pile ever, with $29 billion to deploy.
• The company has $14 billion worth of dry powder to invest in private equity and $12 billion in real estate. Those two businesses make up more than half of Blackstone's assets, a reversal from last year, when the hedge-fund portion of the business made up more than 53% of assets.
• The credit crunch and lack of financing have meant private equity firms have struggled to spend money on leveraged buyouts over the past year, and thus have large amounts of cash, known as "dry powder," to invest.
• Asked about the potential for more banking deals, James said there are about three transactions he is "looking hard at."
• Second-quarter earnings before income taxes, noncash charges for vesting equity-based compensation, and amortization of intangible assets -- a measure it calls "economic net income" (ENI) -- were $173 million, up from $100 million a year earlier. On an after-tax basis, ENI was 16 cents a share, compared with 15 cents a year earlier. Analysts polled by Reuters expected, on average, 9 cents per share.
• Blackstone prefers to focus on the measure of ENI because of the big payouts associated with its more than $4 billion initial public offering.
• James said Blackstone wrote up the value of its private equity porfolio by 3 percent for the quarter, meaning its value is essentially flat for the year so far. However, Blackstone wrote down the value of its real estate portfolio by 19 percent.
• One problem private equity firms have faced during the market turmoil is the inability to exit investments through inital public offering. However, James said if the markets hold up and continue their present trend, there could be some IPOs from Blackstone's private equity portfolio in the next 12 months.
• The company said it would pay its regular quarterly distribution of 30 cents a share.

Key point:

• Blackstone has almost no debt coming due in its portfolio companies until 2013.

[May 7, 2009: Blackstone Group Narrows Loss]
[Mar 31, 2009: Bookkeeping - Starting Blackstone Group]

Long Blackstone Group in fund; no personal position