On Friday, Goldman Sachs (NYSE:GS) maintained a Neutral rating and a $150.00 price target for The Blackstone Group (NYSE: NYSE:BX) stock, highlighting the company's third-quarter performance and management's positive outlook for future growth.
The firm's third-quarter results were approximately in line with expectations, showing a 6% year-over-year increase in management fees, a break from the less than 2% growth seen since the third quarter of 2023. This uptick is attributed to the expiration of several fee holidays and the activation of additional funds.
Management fees are anticipated to continue their upward trajectory, potentially exceeding 10% growth in 2025 and 2026, leading to an average year-over-year growth of around 15% in fee-related earnings (FRE). In the private equity space, The Blackstone Group expects an acceleration in capital velocity and realizations, while in real estate, the firm is likely to continue as a net buyer in the short term. Despite these optimistic forecasts, Goldman Sachs remarks that the stock price may be outpacing the company's earnings trajectory.
Year-to-date, Blackstone's shares have seen a roughly 30% increase, even with slight negative revisions to earnings per share (EPS) for 2025 and 2026. This surge has led to a price-to-earnings (P/E) ratio expansion of 30% year-to-date, reaching 35 times the 2025 EPS and 30 times the 2026 EPS. Blackstone's valuation now commands a premium compared to its mid-teen FRE growth algorithm, with a price-to-FRE multiple exceeding 50 times for 2025, and a PEG ratio over 3 times, which is the highest in its peer group.
Goldman Sachs's EPS estimates for Blackstone in the coming years are relatively stable, with slight adjustments to $4.21 for 2024, $5.36 for 2025, and $6.62 for 2026, from the previous estimates of $4.17, $5.48, and $6.56, respectively. These figures remain modestly below the consensus.
In other recent news, The Blackstone Group has shown strong financial performance in the third quarter of 2024. The company reported a GAAP net income of $1.6 billion and distributable earnings of $1.3 billion. A significant development includes the acquisition of AirTrunk for $16 billion, making Blackstone the world's largest data center provider.
Citi recently updated its financial outlook on Blackstone, raising the price target to $170.00 from $157.00 and maintaining a Neutral stance. The firm's Fee-Related Earnings (FRE) outperformed Citi's estimates, leading to an improved fundraising outlook. Analysts anticipate that FRE will increase in the upcoming fourth quarter, bolstered by Blackstone Infrastructure Partners (BIP) crystallization and other factors.
In other company news, Blackstone's total assets under management (AUM) reached $1.1 trillion, marking a 10% increase year-over-year. The company's private credit business grew to $432 billion and the private wealth channel raised $21 billion year-to-date. These developments are part of recent events that have seen continued growth and positive momentum across Blackstone's business.
InvestingPro Insights
Blackstone's recent performance and future outlook align with several key metrics and insights from InvestingPro. The company's market capitalization stands at an impressive $206.63 billion, reflecting its significant position in the asset management industry.
InvestingPro data shows that Blackstone's revenue growth has been robust, with a 35.11% increase over the last twelve months as of Q3 2024, and an even more impressive 54.13% quarterly growth in Q3 2024. This aligns with Goldman Sachs' observation of increasing management fees and the company's positive growth trajectory.
Two relevant InvestingPro Tips highlight Blackstone's current market position:
1. Blackstone is trading near its 52-week high, which corroborates the article's mention of the stock's significant year-to-date increase.
2. The company has maintained dividend payments for 18 consecutive years, underscoring its financial stability and commitment to shareholder returns.
It's worth noting that Blackstone's P/E ratio (adjusted) stands at 57.15, which is consistent with Goldman Sachs' assessment of the stock's valuation premium compared to its growth prospects. This high multiple suggests investors are pricing in substantial future growth, aligning with management's optimistic outlook for fee-related earnings growth.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips that could provide further insights into Blackstone's financial health and market position.
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