Blackstone beats expectations, credit shines, IPOs in sight
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The news: Blackstone reported a better than expected 5.5% rise in third-quarter distributable earnings to USD1.28 billion ($1.91 billion), driven by inflows to its credit arm, which is now its largest business.
The numbers: Blackstone’s distributable earnings per share were USD1.01, surpassing the analysts' average estimate of USD0.91 in a Bloomberg poll and USD0.92 in a Reuters poll.
Credit and insurance accounted for USD354.7 billion of Blackstone’s USD1.1 trillion in assets under management, edging out real estate as the biggest unit.
Fundraising totalled USD40.5 billion, including USD21.39 billion from credit and USD10.20 billion in private equity. The firm deployed USD34 billion, buoyed by increased dealmaking as the US Federal Reserve cut rates.
It committed an additional USD20.1 billion that had not yet deployed in the quarter.
Shares rose as much as 7.22% to USD171.25 each, in morning trading.
The context: The growth of credit reflects the shift by major alternative-asset managers toward becoming financial conglomerates to better diversify their operations across private assets beyond private equity.
While company buyers have cautiously returned to dealmaking, many have struggled to achieve the high prices they expected.
Blackstone's key business lines of private equity and real estate saw muted realisations in the third quarter, with distributable earnings dropping 11% in PE and 3% in real estate. In credit and insurance, distributable earnings were up 26%.
COO Jonathan Gray expressed optimism for 2025, predicting a stronger IPO market as interest rates keep falling, which would benefit Blackstone’s realisations and DPI.
What they said: “We will see a much better IPO market in 2025 and obviously for our business realisations DPI, that's a very good thing,” Gray told analysts in the earnings call.
“I’m a believer that the environment is falling into place, both for more IPOs and more M&A. On the M&A front in terms of the private side, certainly debt costs of capital coming down makes a huge difference.”
“As the costs of capital comes down, people can borrow more, and it allows the private market to become much more robust. As stock prices go up, obviously, strategic acquirers become more active in M&A.
“As the price of the public market goes off, it’s like a magnet pulling private companies into the market.”
The source: Blackstone release
