Jefferies Lowers Estimates/Price Target on Blackstone Group (BX)

Jefferies & Company is out with a research report this morning, where it lowers its estimates on Blackstone Group BX; it also lowered the company’s price target to $11.50, from $14.50. The stock is currently rated Hold. The Jefferies analysts said, “We are reducing our 2Q10 EPS estimate by $0.19 to $0.12. This predominantly reflects a combination of lower performance fee assumptions and lower investment income from seed investments. Our reversal of performance fees estimates, which we believe will mostly be unrealized, primarily reflects the decline in the global equity markets in the period (S&P down 11.4%) along with limited portfolio company realizations.” They added, “Deal activity within BX's PE segment was relatively quiet during the quarter as funding closures remain relatively limited. BX announced no significant exits this quarter, despite several media reports of increased activity. As a result we do not anticipate any meaningful realized gains during the quarter. However, add-on financings and activity within the existing portfolio likely contributed modestly. In terms of new investments, newsworthy items were relatively few—a $50M investment in an Indian media company and two add-on investments by Summit Materials.” The Jefferies analysts further noted, “Given the sharp decline in the equity markets, we anticipate a modest reduction in the carrying value of BX's PE and RE portfolios. The change in public comps will likely be somewhat offset by a continued gradual improvement in the underlying fundamentals of the portfolios. A review of BX's PE portfolio holdings as compared to publicly traded comps suggests that PE portfolio marks may see declines in the neighborhood of 6-8%.”