Shares of Blackstone Group LP (NYSE: BX) have been dropping in early trading after the company reported this morning a plunge of 89% in its fourth-quarter profit. The company's quarterly numbers were dragged down by higher write-downs related to its holdings in bond insurer Financial Guaranty Insurance Co. Wall Street has reacted by pushing the stock down 3.4% to $14.08, and at one point, traded shares down to $13.82, which set a new all-time low for the stock since its debut last June.Excluding compensation expenses, the manager of the world's largest leveraged-buyout fund announced that its quarterly profit dropped to $88 million, compared with $808.1 million a year ago. Blackstone's income declined through the quarter, hurt by its investment in Financial Guaranty Insurance.
Deterioration in the credit markets, which came with lower takeover fees and reduced the value of its new investments, made the company post adjusted earnings of 8 cents per share. As Trey Thoelcke discussed, analysts had been expecting Blackstone to show quarterly earnings of 19 cents per share. The company failed again to beat, or at least to match, analysts' predictions.
For the quarter, revenue also plunged 73% to $345 million from $1.28 billion a year ago, due in large to $141.8 million in negative revenue related to performance allocation fees.
Blackstone reported a quarterly loss of $170 million for the fourth-quarter due to non-cash compensation charges related to its IPO. Following its June initial public offering that surpassed $4 billion the large leveraged buyout market has been suffering on pressure from the credit crisis. Thus, Blackstone's shares have seen a drop of 53% from their $31 IPO price in June.
Looking ahead, Blackstone didn't show too much optimism over its further gains and said it expects more losses related to the challenging business conditions.The company believes that difficult market conditions will continue during 2008, and cited a declining borrowing ability and a material drop related to new private equity acquisition volume.
Eliza Popescu is a financial writer for the online investment advisory service Investor's Observer.
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