Key Takeaways
- • Ares Management, with $671.3 billion in assets under management, reports third-quarter earnings Thursday before the market opens, with investors focused on whether it can sustain aggressive growth targets amid a sharp pullback in private credit fundraising.
- • Alternative investment fundraising has fallen 14% through September, with credit strategies down 48% year-over-year to $42.5 billion, according to the report.
- • Analysts expect Ares to post EPS of $1.27 on revenue of $1.25 billion, but both figures would mark a sequential decline from the prior quarter, when revenue was $1.43 billion.
- • BDC fundraising has dropped 62% to $18.8 billion as redemption requests led many large non-traded BDCs to cap withdrawals this year.
- • Twenty analysts maintain a consensus Buy rating with a mean price target of $144.70, implying 18% upside from $122.19, though BMO Capital, Piper Sandler, Morgan Stanley and UBS have recently cut targets.
Summary
Ares Management, one of the world's largest alternative-asset managers with $671.3 billion in assets under management, reports third-quarter earnings Thursday before the market opens. According to Investing.com, the key question for investors is whether the firm can deliver its 16-20% annual fee-related earnings growth target through 2028 despite a sharp slowdown in private credit fundraising.
The fundraising backdrop is weak. Alternative investment fundraising has fallen 14% through September, and credit strategies are down 48% year-over-year to $42.5 billion. The rotation away from private credit in the wealth channel is accelerating, with BDC fundraising down 62% to $18.8 billion after a wave of redemption requests pushed many large non-traded BDCs to cap withdrawals this year. Analysts point to roughly $800 million of potential management fees embedded in existing capital that has yet to be deployed, which could support near-term revenue even if new fundraising slows.
Consensus expectations call for EPS of $1.27 and revenue of $1.25 billion for the quarter ended September, representing year-over-year growth of 6.7% and 16.8%, respectively. Both figures would nonetheless be sequentially lower, with revenue down 12.6% from the $1.43 billion reported in the second quarter. EPS estimates have declined 4% over the past two months, and revenue estimates have edged down 1.8% over the same period.
Direct lending remains a focal point. Ares closed $8.2 billion in new U.S. direct lending commitments in the second quarter, bringing its trailing 12-month total to $52.3 billion. Analysts expect management to address whether higher base rates and wider spreads are offsetting deployment challenges created by rising rates.
In the second quarter, Ares slightly missed EPS expectations at $1.29 versus the $1.30 consensus, while revenue of $1.43 billion beat estimates by 7.5%. The company has posted trailing 12-month revenue growth of 32% and operating income growth exceeding 200%. Recent price target cuts from BMO Capital, Piper Sandler, Morgan Stanley and UBS suggest some caution, even as the consensus mean target of $144.70 implies 18% upside from the current price of $122.19.
The fundraising backdrop is weak. Alternative investment fundraising has fallen 14% through September, and credit strategies are down 48% year-over-year to $42.5 billion. The rotation away from private credit in the wealth channel is accelerating, with BDC fundraising down 62% to $18.8 billion after a wave of redemption requests pushed many large non-traded BDCs to cap withdrawals this year. Analysts point to roughly $800 million of potential management fees embedded in existing capital that has yet to be deployed, which could support near-term revenue even if new fundraising slows.
Consensus expectations call for EPS of $1.27 and revenue of $1.25 billion for the quarter ended September, representing year-over-year growth of 6.7% and 16.8%, respectively. Both figures would nonetheless be sequentially lower, with revenue down 12.6% from the $1.43 billion reported in the second quarter. EPS estimates have declined 4% over the past two months, and revenue estimates have edged down 1.8% over the same period.
Direct lending remains a focal point. Ares closed $8.2 billion in new U.S. direct lending commitments in the second quarter, bringing its trailing 12-month total to $52.3 billion. Analysts expect management to address whether higher base rates and wider spreads are offsetting deployment challenges created by rising rates.
In the second quarter, Ares slightly missed EPS expectations at $1.29 versus the $1.30 consensus, while revenue of $1.43 billion beat estimates by 7.5%. The company has posted trailing 12-month revenue growth of 32% and operating income growth exceeding 200%. Recent price target cuts from BMO Capital, Piper Sandler, Morgan Stanley and UBS suggest some caution, even as the consensus mean target of $144.70 implies 18% upside from the current price of $122.19.
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