Shares of private equity firm KKR tumble as net income falls in fourth quarter

Shares of U.S. investment firm KKR & Co fell more than 6% on Tuesday after the company said earnings fell in the fourth quarter despite earnings more than doubling, buoyed by strong sales of assets in its private equity portfolio.

The company that manages several alternative asset classes said its net profit fell to $507.558 million, or $0.82 per share, from $1.479 billion, or $2.46 per share recorded a year ago. year. KKR’s adjusted earnings per share came in at $1.59, beating market expectations of $1.21 per share.

The private equity firm said its management fees jumped 44% to $2.1 billion for the year. Growth was driven by record fundraising activity, with AUM organic new capital raised during the year amounting to $121 billion, compared to $44 billion in 2020.

The company reported record profit after distribution, which represents cash used to pay dividends to shareholders, of $1.4 billion, up from $544.1 million a year earlier, Reuters reported.

The company said its assets under management (AUM) reached $471 billion, up 87% year-over-year, with $19 billion in new organic capital raised in the quarter and $121 billion dollars for the year.

KKR stock fell more than 6% to $66.30 on Tuesday. The stock has fallen more than 9% so far this year after jumping more than 80% in 2021.

“Strong near-term growth with a fundraising supercycle and increased GA coming into earnings, but we see this reflected in the current valuation price for a business model with greater contribution to earnings. balance sheet earnings (~40%).While strong investment performance could lead to upward revisions to estimates, we have less visibility into more episodic investment income gains,” noted analyst Michael Cyprys. shares at Morgan Stanley.

“Mgmt’s increased focus on expanding the platform with adjacent strategies and scaling successor funds is expected to drive higher fee-related revenue (FRE).”

KKR stock price prediction

Eight analysts who offered stock quotes for KKR over the past three months forecast a 12-month average price of $88.81 with a high forecast of $93.50 and a low forecast of $83.00.

The average price target represents a 34.01% change from the last price of $66.27. Of these eight analysts, six rated “Buy”, two rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base price target at $83 with a high of $115 in a bullish scenario and $28 in a worst-case scenario. The investment bank assigned an “equal weight” rating to the shares of the investment firm.

Several analysts also updated their stock outlook. Wells Fargo reduced the target price to $86 from $90. Oppenheimer lowered the target price from $89 to $88. Deutsche Bank reduced the target price from $94 to $90. Citigroup raised the price target to $93.5 from $92.

Technical analysis suggests it’s good to hold for now, as the 100-day moving average and the 100-200-day MACD oscillator are giving mixed signals.

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