Carlyle Group Inc CG Monday announced disappointing second-quarter earnings.
The company’s results highlight issues around mix and realizations in funds, according to JPMorgan.
Analyst Kenneth Worthington downgraded the rating for Carlyle Group from Overweight to Neutral, while reducing the price target from $46 to $44.
The Carlyle Group Thesis: The company reported earnings of 78 cents per share, missing consensus of 83 cents per share, mainly due to “higher performance fee compensation and lower investment income,” Worthington said in the downgrade note.
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Performance fees were light, at $156 million, “the lowest level since the Covid driven M&A slowdown in 2020,” he added.
The performance revenues contracted despite Carlyle Group’s realized proceeds remaining flat with the first quarter, “pointing to mix and realizations in funds not taking carry,” the analyst stated.
While the company’s reported in-carry ratio increased from 68% in the first quarter to 76% in the second, it remained lower than last year’s 84% ratio, he further said.
“Carlyle is first and foremost a corporate buyout manager and weaker performance we think has and will lead to smaller buyout funds in Europe and Asia following a smaller US buyout fund,” Worthington wrote.
CG Price Action: Shares of Carlyle Group had declined by 0.31% to $40.78 at the time of publication on Tuesday.
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