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Will Carlyle Group (CG) Stock Be Hurt Today By This Downgrade?

NEW YORK (TheStreet) -- Shares of Carlyle Group (CG) were downgraded to "neutral" from "buy" at Goldman Sachs (GS) on lower performance fee multiple and increased risk due to market volatility. Goldman lowered the price target to $35 from $42.

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Separately, TheStreet Ratings team rates CARLYLE GROUP LP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate CARLYLE GROUP LP (CG) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, disappointing return on equity and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Capital Markets industry. The net income has significantly decreased by 27.2% when compared to the same quarter one year ago, falling from $33.80 million to $24.60 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, CARLYLE GROUP LP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • The share price of CARLYLE GROUP LP has not done very well: it is down 6.00% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
  • 35.21% is the gross profit margin for CARLYLE GROUP LP which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, CG's net profit margin of 2.14% is significantly lower than the industry average.
  • CARLYLE GROUP LP's earnings per share declined by 37.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CARLYLE GROUP LP increased its bottom line by earning $1.80 versus $0.31 in the prior year. This year, the market expects an improvement in earnings ($3.05 versus $1.80).
  • You can view the full analysis from the report here: CG Ratings Report

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