Today’s news: BB&T Corp. (BBT) and Blackstone Group LP (BX) both reported strong earnings beats; Sell ConocoPhillips (COP).
BB&T Corp. (BBT, $51.73– yield 2.5%) reported record first quarter adjusted diluted earnings per share of $0.97 this morning, when the market expected $0.92. The earnings beat was attributed to lower non-interest expenses and lower tax rates. The bank’s purchase of Regions Insurance is expected to close in the third quarter and contribute revenue to 2018 results. Factors related to the Regions acquisition such as transaction cost, earnings accretion, and its effect on 2018 share repurchases will serve to make 2018 and 2019 earnings estimates less predictable in the coming months. The company plans to increase the dividend in the third quarter of 2018.
I will decide how to proceed with BBT after analysts rework their earnings estimates with input from first quarter results. In the interim, I plan to hold BBT as it retraces its January high of 56. Hold.
Blackstone Group LP (BX, $32.71 – yield 7.6% *) reported first quarter results this morning, and a record $450 billion assets under management. CEO Stephen Schwarzman stated, “Today I am pleased to announce we have increased our unit repurchase authorization to $1 billion. We also intend to make a special distribution of $0.30 per unit in 2018 [to be paid out over the next three quarters] representing a portion of the proceeds received in connection with the conclusion of our direct lending sub-advisory relationship.”
Economic net income (ENI) was reported at $0.65 and $0.55, and also $0.53 per diluted unit in the press release vs. the final consensus estimate of $0.43. (I couldn’t discern the source of the discrepancy, and will watch for additional research reports that might clarify the numbers.) Nevertheless, Blackstone Group had a much better-than-expected quarter, and the share price is rising.
Blackstone Group is the world’s largest and most diversified alternative asset manager. The company deploys capital into private equity, lower-rated credit instruments, hedge funds and real estate. I expect BX to rise to its January high near 36 this year. BX could appeal to dividend investors, growth & income investors, and traders who would be happy with a potential 10% capital gain this year. Strong Buy.
*The payout varies each quarter, with the total of the last four announced payouts, plus the $0.30 special 2018 distribution, yielding 7.6%.
ConocoPhillips (COP, $66.04– yield 1.7%) – I stated recently that tremendous 2018 earnings growth will be giving way to slow 2019 earnings growth, which at this point is estimated at just 4.1%. The stock just had a big run-up, it’s finally falling a bit today, and we’re up 20% since COP joined the Growth Portfolio in January. Sell COP now. I will wait for a pullback in energy stocks, then add another E&P company to the portfolio that has a much stronger earnings growth outlook. Sell.