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Why Is Carlyle (CG) Up 11.4% Since Last Earnings Report?

It has been about a month since the last earnings report for Carlyle Group (CG). Shares have added about 11.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Carlyle due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Carlyle’s Q3 Earnings & Revenues Beat, AUM Slips

Carlyle reported third-quarter 2022 post-tax distributable earnings per share of $1.42, which outpaced the Zacks Consensus Estimate of $1.04. However, the bottom line declined from $1.54 in the year-ago quarter.

While a decline in AUM and revenues on lower realized performance revenues marred the results, lower expenses alleviated the bottom-line pressure.

Net income attributable to Carlyle was $280.8 million compared with $532.8 million in the prior-year quarter.

Revenues & Expenses Fall

Segmental revenues were $1.40 million, decreasing 8% from the year-ago quarter. However, the top line beat the Zacks Consensus Estimate of $1.08 million.

Fee revenues in the third quarter increased 29.5% year over year to $569.7 million. A rise in fund management fees, net transaction and portfolio advisory fees, and fee-related to performance revenues supported the increase. Realized performance revenues decreased 24.3% to $764.8 million.

Total segmental expenses amounted to $757.3 million, down 4.5% from the prior-year quarter. The decrease was primarily due to a fall in realized performance revenue-related compensation.

AUM Declines

As of Sep 30, 2022, total AUM was $368.7 billion, down 2% from the prior quarter. This was primarily attributed to a high level of realizations, which more than offset new capital raised, as well as the negative FX impacts.

Fee-earning AUM for the reported quarter was $260.2 billion, up marginally from the prior quarter.

Outlook

The company expects FRE to be $825- $850 million in 2022.

Management expects net realized performance revenues of $1 billion, on average, over each of the next several years.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, Carlyle has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Carlyle has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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