Why Carlyle Group (CG) Would Reach $36

Story updated at 9:55 a.m. to reflect market activity.

NEW YORK (TheStreet) -- UBS raised its price target for Carlyle Group (CG) to $36 from $34 Thursday, maintaining its "neutral rating for the company.

Carlyle Group gained 2.7% to $35.93 in morning trading.

Analysts Brennan Hawken and David Eads said the increase is due to strong performance fees, and realized performance fees that were higher than forecast.

"Carlyle reported 4Q economic net income of $1.64 per unit, well above both our estimate and consensus," the analysts wrote.

"Stronger performance fees drove the ENI beat and realized performance fees were also higher than we forecast, resulting in a 4Q distribution of $1.40. We are maintaining our 2014 and 2015 ENI expectations essentially unchanged and raising our 2014 distribution estimate to $1.95 from $1.86 per unit, as we expect realizations will remain healthy despite some activity being pulled forward into 4Q."


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

"We rate CARLYLE GROUP LP (CG) a SELL. This is based on some significant below-par investment measures, which should drive this stock to significantly underperform the majority of stocks that we rate. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity and feeble growth in its earnings per share."

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 87.6% when compared to the same quarter one year ago, falling from $18.60 million to $2.30 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Capital Markets industry and the overall market on the basis of return on equity, CARLYLE GROUP LP has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • CARLYLE GROUP LP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CARLYLE GROUP LP reported lower earnings of $0.31 versus $1.70 in the prior year. This year, the market expects an improvement in earnings ($2.76 versus $0.31).
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • 41.05% is the gross profit margin for CARLYLE GROUP LP which we consider to be strong. Regardless of CG's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CG's net profit margin of 0.25% is significantly lower than the industry average.
  • You can view the full analysis from the report here: CG Ratings Report

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