Skip to Content
Morningstar

KKR Earnings: Still Exceeds Expectations Despite 23% Decline in Distributable Earnings

""
Securities In This Article
KKR & Co Inc Ordinary Shares
(KKR)

There was little in narrow-moat KKR’s KKR second-quarter results that would alter our long-term view of the firm. We expect to leave our $59 fair value estimate in place. We view the shares as fairly valued right now.

KKR closed the June quarter with $420.0 billion in fee-earning assets under management, up 1.0% sequentially and 9.2% year over year. Adjusted net inflows of $3.6 billion were in line with our expectations but still below the quarterly run rate for flows of $15.3 billion over the previous eight calendar quarters. KKR raised $12.8 billion in new capital during the quarter, with $9.6 billion of existing capital deployed, and it closed out the period with uncalled commitments at $100.1 billion.

Total revenue increased to $3.6 billion in the quarter (from $323 million in the year-ago period) as both asset management and insurance segment revenues were up meaningfully year over year. Management fee revenue was up 22.6% year over year, and KKR also reported a large increase in capital allocation-based income, which lifted overall asset management revenue to $1.5 billion from negative $308 million in the prior-year period. Insurance segment revenue increased to $2.2 billion from $632 million in the year-ago period, primarily due to growth in earned premiums and meaningfully higher investment income year over year.

Fee-related earnings (which measure profits from revenue received on a recurring basis and not subject to future realization events) of $602 million rose 30.5% year over year from $461 million in the year-ago quarter, while aftertax distributable earnings (which remove the effects of unrealized activity) of $653 million, or $0.73 per share, represented a 23.3% decline from the year-ago quarter’s results of $851 million, or $0.96 per share. However, this was slightly better than the FactSet consensus estimate of $0.71 per share.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

More in Stocks

About the Author

Greggory Warren

Strategist
More from Author

Greggory Warren, CFA, is a strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers the traditional U.S.-and Canadian-based asset managers, as well as Berkshire Hathaway.

Before assuming his current role in 2017, Warren covered the financial-services sector as a senior analyst since late 2008. Prior to that time, he covered non-alcoholic beverage manufacturers and distributors, packaged food firms, food service distributors, and tobacco companies. Before joining Morningstar in 2005, Warren worked as a buy-side equity analyst for more than seven years, covering consumer staples and consumer cyclicals.

Warren holds a bachelor's degree in accounting and English from Augustana College. He also holds the Chartered Financial Analyst® designation and is a member of the CFA Society of Chicago. During 2014-19, Warren was selected to participate on the analyst panel at Berkshire Hathaway’s annual meeting, asking questions directly of Warren Buffett and Charlie Munger. The analyst panel was disbanded ahead of Berkshire’s 2020 annual meeting. Warren also ranked second in the investment services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

Sponsor Center