KKR & Co. KKR is well-positioned to benefit from impressive growth in assets under management (AUM). Also, the company’s decent organic growth and strong liquidity profile position it well for the future.

The Zacks Consensus Estimate for KKR’s 2024 and 2025 earnings has been revised upward over the past 60 days. This shows that analysts are optimistic regarding the company’s earnings growth prospects.

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Let us dive deeper into the factors that make KKR stock worth betting on now.

Earnings Growth: KKR witnessed earnings growth of 15.1% over the past three to five years, driven by its organic growth strategy and rising AUM balances.

Also, the company has a decent earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average beat being 7.6%.

The Zacks Consensus Estimate for earnings indicates a 37.7% year-over-year increase for 2024 and 30% growth for 2025.

Revenue Strength: KKR has been witnessing decent organic growth. The company’s net revenues saw a CAGR of 43.3% in the last five years (ended 2023) with some volatility. The trend persisted in the first nine months of 2024.

This increase was driven by expanding existing traditional private equity businesses and third-party businesses. Over the years, the company has added capabilities to capture a growing set of opportunities from infrastructure, real estate, growth and core investing activities. Through these efforts, it is increasing its deal counts meaningfully and growing its revenue base.

The Zacks Consensus Estimate for revenues indicates a 24% year-over-year increase for 2024 and 18.6% growth for 2025.

Impressive AUM Growth: The company’s total AUM has been witnessing improvements over the years. The metric saw a five-year (2018-2023) compound annual growth rate (CAGR) of 23.2%, with the trend continuing in the first nine months of 2024. The company’s efforts to improve and add investment strategies continue to support AUM growth.

At its 2024 investor day held in April, KKR laid out a plan to scale its core businesses as it aims to reach at least $1 trillion in AUM in five years. The firm intends to build on its existing asset management, insurance and strategic holding units to reach the milestone.

Solid Liquidity Position: The company enjoys a decent balance sheet. As of Sept. 30, KKR had an outstanding debt of $8.8 million, lower than the cash and investments of $16.3 million. Hence, given a decent liquidity position and manageable debt levels, the company is less likely to default on interest and debt repayments in the near term, even if the economic situation worsens.

KKR’s strong liquidity supports the capital distribution plan. It continues to reward shareholders handsomely. In March 2024, the company hiked its dividend  6% to 18 cents per share. In the last five years, it raised dividends five times, with an annualized growth rate of 7.1%. Currently, the company’s payout ratio is 19% of earnings.

Apart from dividends, KKR has a share repurchase plan in place. In April 2024, the company’s board of directors amended a share repurchase program so that when the remaining available amount under the share repurchase program becomes $50 million or less, the total available amount under the share repurchase program will automatically add $500 million to the remaining available amount.  As of October 2024, there was approximately $69 million of authorization remaining under the program.

Ambitious Targets: The company expects to raise more than $300 billion of capital by 2026. KKR expects to raise capital across 30 investment solutions and three flagship strategies — North America private equity (“PE”), Asia PE and global infrastructure.

Further, the company expects the massive and untapped private wealth channel to create an $11-trillion market opportunity by 2027. KKR projects fee-related earnings per share to be more than $4.50 (which implies a 2023-2026 CAGR of 20%). Total operating earnings are projected to exceed $7 per share.

Adjusted net income per share is anticipated to be $7-$8 (implying a 2023-2026 CAGR of 30%). The company also seeks gain on earnings per share to reach $15 in 10 years or less.

KKR shares have witnessed a stellar performance in the past year. The stock has skyrocketed 86.3% compared with the industry’s rise of 42.2%.

 

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The company currently carries a Zacks Rank #2 (Buy).

A couple of other top-ranked stocks from the asset management space are Victory Capital Holdings, Inc. VCTR and Federated Hermes Inc. FHI.

The Zacks Consensus Estimate for VCTR’s 2024 earnings has been unchanged over the past seven days. Its shares have gained 20.2% in the past three months. Currently, Victory Capital sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Federated Hermes carries a Zacks Rank #2 at present. Its earnings estimates for 2024 have been unchanged over the past seven days. In the past three months, FHI shares have rallied 14.5%.

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