Apollo Global Management (APO, Financial), a private equity company with over $270 billion in assets under management, has suffered a loss of over 30% in stock price since Jan. 2. Investor sentiment is down, but the company’s long-term outlook remains promising.
The year-to-date losses relate to headwinds and the company’s lack of growth in the first two quarters of 2018. Third-quarter results show fee-related earnings were 20% higher compared to the same quarter a year prior, rising to 48 cents a share.
Apollo started the year off with issues in the first quarter, as management fees fell 8.1% year over year to $71.1 million primarily due to ADT’s performance. The company also had performance fees that were $-166.1 million, falling from $319 million.
Total segment revenue has remained weak in 2018, falling across the board for most of the year. The company posted $149.6 million, down from $665.3 million during the same period a year prior. Major losses came from the company’s unrealized performance fees that accounted for $420 million. Total performance fees dropped significantly on the quarter.
Second-quarter results showed significant improvement with total segment revenues of $505 million, up from $436 million during the same period a year prior.
Segment expenses have dropped significantly in 2018, and this remains a good sign for investors worried about the company’s revenue issues. Expenses in the most recent quarter were $273 million, down from $315 million during the same period last year.
Apollo’s lower expenses, despite some slowing in segment revenues, will help offset earnings concerns slightly. The company’s portfolio of investments is impressive, and this should allow the company to withstand near-term headwinds.
The company owns brands that include Chuck E. Cheese’s, Claire’s, Harrah’s Entertainment, Great Wolf Resorts, a major stake Norwegian Cruise Lines, Realogy, Rexnord Corporation and Rackspace. The company also owns CareerBuilder, which has been under increased pressure from local staffing agencies and Monster.com. The entity is expected to grow in the coming year, as job growth remains strong in most of the country.
Apollo Management’s stock is at $23.90 a share, down significantly on the year. Projections have the stock trading at a low of $34 a share in the next 12 months or as high as $44.
The company is in talks to acquire Arconic in an $11 billion potential deal. Overall, Apollo’s vast portfolio and lower expenses should allow it to increase revenues in the long term.
Disclosure: The author has no stakes in the listed equities.
