Blackstone (BX) delivered a mixed third-quarter result overnight, with distributable earnings beating expectations but softer fee-related earnings, real estate fees and deployment highlighting the impact of higher rates on transaction activity. The shares initially fell before reversing to trade up ~8% by the close, with the market ultimately focusing on strong inflows and a still-healthy medium-term outlook.
Key Q3 highlights:
- Distributable EPS: US$1.32 vs US$1.26 expected.
- AUM: US$1.37tn, up 10% YoY.
- Inflows: US$63.3bn vs US$58.8bn expected.
- Fee-related earnings: US$1.57bn vs US$1.59bn expected.
- Deployment: US$30.1bn vs US$36.9bn expected.
- Realizations: US$33.1bn.
- Dry powder: US$228.9bn.
- Quarterly dividend of US$1.12/share.
The main positive was fundraising, with strong inflows across the platform and credit/insurance contributing more than half of the quarter’s total. Infrastructure was again the strongest-performing strategy, helped by data centres, logistics and power infrastructure, while private equity AUM also continued to grow strongly.
The softer areas were real estate, fee growth and deployment. Higher rates are still slowing deal activity and exits, which is delaying the earnings recovery across parts of the platform. Real estate AUM fell 3.6% YoY, while base management fees were weaker than expected.
MM’s view: We own BX and still like the medium-term setup. The quarter was not clean, but it reinforced the key reason we like the story – Blackstone continues to gather significant capital even in a difficult environment and has enormous dry powder ready to deploy when transaction markets improve. The stock has already been heavily de-rated this year, so the debate is increasingly about timing rather than whether the franchise is impaired. Lower rates, stronger exits and improving real estate activity would be the key catalysts for a more meaningful earnings reacceleration.
MM remains long & bullish BX US ~$US118
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