In August 2006, I began to post on the idea that private equity was peaking. And I got into an interesting debate on the topic on CNBC this February. So today's announcement on Blackstone's earnings miss does not come as a huge surprise. Blackstone missed analyst's estimates by nine cents a share -- profit excluding some compensation costs dropped to $234 million from $239.1 million in 2006. On that basis, profit was 21 cents a share -- 9 cents below analysts' 30 cent average estimate.
There was some good news though. Revenue in the corporate private-equity segment jumped 42% to $227.3 million on higher fees. Revenue in the alternative asset-management segment, built on hedge funds, surged 88% to $124.9 million with more fee-earning assets under management. Financial advisory revenue went up 60% to $84.3 million.
The question for investors in its stock is whether today's announcement is the beginning of a longer downhill slide. It is a little hard to believe that subprime mortgages -- which are made to individual homeowners -- could have an impact on lending for commercial real estate. Either this is a convenient excuse, or if it's true, it sends a chilling warning that contrary to the claims of Ben Bernanke and Hank Paulson -- subprime is not contained.
If subprime is hurting commercial real estate, then it's hard to know what parts of the economy are safe from its meltdown.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.
