Strategy

Carlyle Beats Q2 Estimates But Stock Drops 2%

The group made nearly $2.9 billion of new deals in the second quarter, suggesting PE firms are finding more opportunities as markets stabilize.
Matthew HellerJuly 27, 2016

Carlyle Group’s stock fell more than 2% on Wednesday even though its second-quarter earnings beat analysts’ estimates amid healthier financial markets.

The global alternative asset manager reported that economic net income, a key performance measure for private equity, nearly doubled from the first quarter to $115.1 million after taxes, or 35 cents per share. Analysts had forecast ENI of 31 cents per share.

“Carlyle performed well on all metrics in the quarter, with $5.0 billion in gross new fund commitments, 5% appreciation across our carry fund portfolio, $5.3 billion in realized proceeds for our fund investors, and a healthy $0.63 per common unit distribution for unitholders,” David Rubenstein, Carlyle’s co-chief executive, said in a news release.

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“Our firm is well positioned to take advantage of market opportunities wherever and whenever they may arise,” he added.

But Carlyle’s shares fell 2.26% to $16.87 in trading Wednesday. The Wall Street Journal noted that second-quarter profit declined to $6.1 million, down from $30.6 million, as the firm’s buyout funds’ growth slowed and its hedge fund arm again weighed on performance.

“Carlyle’s hedge-fund business has had a disappointing stretch, marked by outflows and poor performance at funds such as Claren Road Asset Management LLC,” the WSJ said.

The U.S. private equity industry had gotten off to a slow start this year, with investor aversion to risk reducing funding for buyouts. But Carlyle made nearly $2.9 billion of new deals in the second quarter, on top of the $4 billion it deployed in the first three months of the year.

“The increase comes after Carlyle invested just $1.9 billion in the same period last year — a sign that buyout groups are finding more opportunities after a markets sell-off eased valuations,” The Financial Times said.

Co-CEO William E. Conway noted that Carlyle has invested $12.7 billion in equity over the last twelve months. “While this is a challenging time to invest given low or negative interest rates around the world alongside slowing growth, I am confident our investment teams will continue to find good opportunities,” he said.