(Reuters) - Alternative asset manager Apollo Global Management LLC (APO.N) reported third-quarter earnings that missed market expectations on Wednesday as the value of its private equity investments grew less than some analysts had expected.
Economic net income (ENI) of 83 cents per share for the quarter was below analysts’ mean estimate for 92 cents, according to Refinitiv data. ENI, a key earnings metric for many U.S. private equity firms, was down from $1.07 a year earlier, and reflects the mark-to-market valuation gains or losses on Apollo’s portfolio.
In the quarter, the value of Apollo’s private equity assets appreciated by 2.3 percent, compared with a 7.5 percent rise for rival Blackstone Group LP (BX.N) in the same period.
Shares were down around 2.5 percent in midday trading, against a broadly higher U.S. stock market.
Apollo's private equity portfolio also lagged the 7.2 percent rise in the benchmark S&P 500 stock index .SPX, viewed as a partial proxy for the value of private equity firms' illiquid assets.
Chief Financial Officer Martin Kelly said the portfolio was adversely affected by struggles with comparable companies which Apollo uses to value its assets.
“In PE, we look at the comps. And so for the comps that we look at, based on the companies that we own, in the quarter there were some headwinds on comp multiple compressions,” Kelly said on an earnings call, referring to when a company’s price-to-earnings multiple drops as investors become wary of its growth potential.
After-tax distributable earnings, or the actual cash available for paying dividends, rose to $226 million from $173.5 million a year earlier.
New York-based Apollo’s assets totaled $270.2 billion at the end of September, up slightly from $269.5 billion in the previous quarter.
Apollo also declared a cash distribution of 46 cents per share for the third quarter.
In a note, Credit Suisse analysts, who have a “neutral” rating on Apollo’s stock, described the earnings as “modestly negative.”
“The softer-than-expected ENI result was driven by lower-than-expected portfolio returns which was offset by a larger-than-anticipated contribution from ATH,” the analysts wrote, referring to income from annuity service provider Athene Holding Ltd (ATH.N), which was spun out of Apollo in 2016.
Carlyle Group LP (CG.O) reported on Wednesday that its corporate private equity funds appreciated 1 percent in the three months through September.
Reporting by Joshua Franklin in New York; Editing by Jeffrey Benkoe and Bernadette Baum