KKR Fourth-Quarter Profit Rises 53% on Fees, Below Estimates

  • Results of 8 cents a share below analyst average of 26 cents
  • Firm says it's repurchased $270 million of stock since October

KKR & Co. said fourth-quarter profit rose 53 percent as the private equity firm’s portfolio appreciated at a faster pace than a year earlier and it earned more in fees. The results missed analysts’ expectations.

Economic net income, which includes unrealized gains, increased to $70.5 million, or 8 cents a share, from $46 million, or 5 cents, a year earlier, New York-based KKR said in a statement Thursday. Analysts predicted 26 cents a share, the average of 17 estimates compiled by Bloomberg.

KKR joins peers Blackstone Group LP, Carlyle Group LP and Apollo Global Management LLC in reporting lower-than-expected profit as volatile stock markets have whipsawed shares of companies they’ve taken public. The firms also mark the value of private investments they hold in line with the market to determine economic net income, or ENI.

“Most of the miss was driven by write-downs stemming from KKR’s balance sheet investments,” Chris Harris, an analyst at Wells Fargo & Co., said in a note to clients Thursday, citing declines in energy and collateralized loan obligation investments. “A disappointing quarter, although perhaps not terribly surprising in hindsight given the sell-off in energy and high-yield markets.”

KKR fell 5.7 percent to $11.04, the lowest intraday level since August, at 10:24 a.m. in New York, extending declines this year to 29 percent. The firm, which unveiled in October a $500 million share repurchase plan, said it’s bought back $270 million of stock. Carlyle, Apollo and Fortress Investment Group LLC have announced buyback programs in the past week collectively worth $550 million.

Private Equity

The value of KKR’s private equity portfolio appreciated 4.8 percent in the quarter, compared with 2.7 percent a year earlier. Carlyle’s rose 3 percent, Blackstone’s gained 2.8 percent and Apollo’s declined 2 percent, while the Standard & Poor’s 500 Index advanced 6.5 percent.

During the quarter, KKR sold its remaining stake in JM Smucker Co., which last year paid KKR cash and stock to buy pet-food company Big Heart Pet Brands. The firm also sold surgery-device maker Lake Region Medical to Greatbatch Inc. and school-memorabilia supplier Jostens to Jarden Corp.

Cash earnings, which reflect gains on those sales and others, were $169 million, compared with $361 million a year earlier.

KKR’s total assets under management were $119.5 billion as of Dec. 31. Starting with Thursday’s earnings report, KKR is including in that figure money committed to its funds but not yet generating fees. On that basis, assets rose from $112.4 billion at the end of the third quarter, KKR said.

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