On Thursday, Deutsche Bank (ETR:DBKGn) adjusted its outlook on The Carlyle Group LP (NASDAQ:CG), reducing the stock price target from $63.00 to $55.00, while still supporting the stock with a Buy rating. The revision comes after an analysis of the company's first-quarter earnings.
The Carlyle Group reported Distributable Earnings (DE) per share of $1.01, but when considering certain one-time items, the core DE per share is approximately $0.94. This figure is slightly below the initially estimated $0.97.
The report also highlighted that Carlyle's core pre-tax Fee-Related Earnings (FRE) per share were around $0.70, compared to the reported $0.74, which is two cents lower than both Deutsche Bank's and the consensus estimates.
Despite this, Carlyle's management remains confident in achieving its three key financial targets for 2024, which were reaffirmed during the earnings call. These targets include a pre-tax FRE of $1.1 billion, an FRE margin of 40-50%, and a fundraising goal of $40 billion.
Carlyle's first-quarter fundraising amounted to $5.3 billion, prompting questions about the feasibility of reaching the annual $40 billion target. Management stressed their expectation to meet this goal, citing strength in asset-based finance, secondaries, retail products, and some areas of private equity. However, no specific details were provided regarding the expected quarterly progression towards the target.
The analysis also took into account the margins. After removing the estimated one-time benefits to global private equity General & Administrative expenses, the margin calculated was 44.0%, which sits between Deutsche Bank's and the consensus estimates, but not as high as the reported 46.6%. This adjusted margin reflects a more conservative view of the company's operational efficiency.
InvestingPro Insights
InvestingPro data provides a deeper look into The Carlyle Group's financial health and market performance as of Q1 2024. With an adjusted market capitalization of $14.72 billion, the company's valuation metrics present a mixed picture. The P/E ratio stands at -23.0, reflecting investor sentiment on the company's earnings potential. The revenue data shows a challenging environment, with a -33.6% year-over-year decline, indicating that Carlyle's top-line growth is under pressure.
The gross profit margin at 58.29% remains robust, showcasing Carlyle's ability to maintain profitability in its core operations. Despite this, the company's operating income margin is negative at -25.1%, suggesting that expenses are outpacing gross profits. For dividend-seeking investors, Carlyle offers a dividend yield of 3.42%, coupled with a dividend growth of 7.69%, which may appeal to those looking for income in addition to capital gains.
InvestingPro Tips highlight the importance of considering both the short-term price volatility and the long-term value proposition. With a 1-year price total return of 46.47%, Carlyle's stock has shown significant appreciation, yet the recent 1-week and 1-month returns have been negative at -10.19% and -11.63%, respectively.
For investors weighing the decision to buy, hold, or sell, these metrics could be crucial. Additionally, users can discover more InvestingPro Tips by using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, where 5 additional tips related to Carlyle are available.
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