KKR's Profit Jumps as First Data Fuels Balance Sheet Gains

KKR & Co. reported first-quarter profit that topped all analyst estimates as payment processor First Data Corp. and other holdings drove gains.

Economic net income, which reflects both unrealized and realized moves in investments, was $549.9 million, or 65 cents a share, compared with a $553 million loss a year earlier, New York-based KKR said in a statement Thursday. The result topped the highest of 13 analysts’ estimates compiled by Bloomberg, who on average expected 51 cents a share.

KKR’s balance sheet is a unique tool for the private equity firm, which uses the $14.3 billion stash to invest in and alongside its funds, and to double down on certain investments. Taking on such direct exposure to assets worked in KKR’s favor this quarter as First Data, its biggest on-balance sheet holding, jumped 9.2 percent. Overall, the firm’s balance sheet investments appreciated 5 percent.

KKR also sold shares in U.S. Foods Holding Corp., which it took public last year, and Galenica AG, a Swiss pharmaceutical business.

Those sales helped drive $346.5 million of distributable earnings, which reflect profits on asset disposals and fund management fees, compared with $168.7 million a year earlier. KKR plans to draw on that pool to pay a dividend of 17 cents a share on May 23.

KKR’s private equity portfolio appreciated 4.7 percent during the three months ended March 31, short of the 5.5 percent gain posted by the S&P 500 index of large U.S. companies and below the 6.9 percent gain reported by Blackstone Group LP. Peers Apollo Global Management LLC and Carlyle Group LP are scheduled to report results in the next week.

Publicly traded private equity firms must mark their holdings to the market each quarter, even though their typical strategy is to hold assets for years. That makes economic net income, which in part reflects these unrealized changes in value, merely a snapshot of assets that may have a long runway before being sold.

KKR, led by billionaire cousins Henry Kravis and George Roberts, managed $137.6 billion in private equity holdings, credit assets, real estate and hedge funds as of March 31. The firm raised $8.5 billion during the three months and distributed $3.6 billion to clients.

Shares of KKR have gained 16 percent, including reinvested dividends, this year.

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