Is Blackstone a Buy After Its Latest Earnings Report?

Blackstone (NYSE:BX), already a behemoth in the alternative asset management sector, keeps getting bigger. However, while its assets under management (AUM) are growing, its earnings aren't necessarily following it higher in a perfectly straight line. That disconnect was on full display during the third quarter.

Here's a look at the alternative investment manager's third-quarter results and whether they're a signal to buy Blackstone stock.

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Blackstone's growth engine remains strong

There was a lot to like in Blackstone's third-quarter earnings report. AUM rose 10% to nearly $1.4 trillion, including nearly $990 billion of fee-earning AUM. Quarterly capital inflows totaled $63.3 billion, reflecting strong demand for its alternative investment products. The company also reported a 6% rise in fee-related earnings to almost $1.6 billion.

Despite strong AUM and fee-related earnings growth, Blackstone's distributable earnings fell 9% to $1.7 billion. Meanwhile, its distributable earnings per share were down 13% to $1.52. As a result, the company's dividend, which varies with earnings, declined to $1.12 per share (from $1.29 per share in the prior quarter and year-ago period). The culprit was a 34% decline in net realizations during the quarter. While the company sold assets during the period, its realized performance revenues from private equity and real estate investments were much lower compared to the third quarter of last year. That's just part of the lumpiness of its business.

The good news is that Blackstone expects that trend to reverse. On its third-quarter conference call, CFO Michael Chea stated, "We anticipate a significant step up in net realizations in the fourth quarter, including the sales of multiple companies." Meanwhile, CEO Steve Schwarzman commented on the call that "the firm's underlying earnings power continues to expand substantially and we are moving toward what we expect will be an outstanding 2027." So, while its earnings vary from period to period, the overall trend is higher.

Is Blackstone stock a buy?

While Blackstone's stock price rallied after reporting earnings, shares are currently down 28.5% from their 52-week high, trading at around $117 per share. Following the third quarter, the alternative investment giant has generated $5.95 in distributable earnings per share over the last 12 months. That has it trading at less than 20 times earnings. While that's not a screaming bargain, it's a reasonable price to pay for a leading asset manager.

It's not unreasonable to believe that Blackstone could grow its earnings at a double-digit annualized rate over the next five years. Through the first nine months of this year, its distributable earnings per share are up 10% compared to the prior-year period. It expects 2027 to be a strong year. Meanwhile, it's benefiting from multiple long-term growth drivers, like its AI investment strategy and the expansion of its private wealth and private credit platforms. If Blackstone grows its earnings at a 12% compound annual rate and its valuation multiple expands to around 23 times earnings, it could deliver 15% annualized returns over the next five years, before accounting for its dividend (4.4% trailing 12-month yield). Even slower 8% annual growth and no multiple expansion deliver a strong total return when factoring in the dividend. That's why I think Blackstone is a buy after its earnings.

However, there are downside risks to consider. Blackstone is betting heavily on AI infrastructure. If that thesis fails to play out, its returns could suffer. It's also expanding in private credit, which has had some growing pains in recent years.

A compelling investment opportunity

Blackstone's latest results reinforce that its long-term growth engine remains healthy, despite near-term earnings volatility. While the stock isn't a screaming bargain, its recurring fee growth, expanding investment platform, and meaningful dividend make it an attractive option for long-term investors comfortable with the risks. If Blackstone's investment strategies deliver anything close to its historical record, the company should create significant value for shareholders over the next several years.

Matt DiLallo has positions in Blackstone. The Motley Fool has positions in and recommends Blackstone. The Motley Fool has a disclosure policy.