KKR analysts downgrade to moderate buy as private equity giant lags market rally
Shares of the New York-headquartered firm have fallen 22 per cent year-to-date, significantly underperforming the S&P 500 and peer ETFs, though analysts project 28 per cent earnings growth for the current fiscal year.
Wall Street analysts have downgraded their consensus rating for KKR & Co. Inc. from a 'Strong Buy' to a 'Moderate Buy', reflecting a shift in sentiment despite the private equity firm’s robust first-quarter financial results. The change in outlook comes as KKR shares continue to lag behind broader market indices, with the stock declining 22 per cent year-to-date compared to an 8.3 per cent rise in the S&P 500 Index.
The New York-headquartered investment firm, which manages a market capitalisation of $91.4 billion across private equity, real estate, and credit strategies, reported first-quarter adjusted earnings per share of $1.39. This represents a 20.9 per cent increase year-on-year, while fee-related earnings rose 23.6 per cent to $10.2 billion. Despite the strong operational metrics, shares closed down more than 1 per cent on May 5 following the release of the quarterly results.
The underperformance is evident when compared to both the broader market and sector-specific benchmarks. Over the past year, KKR has fallen 15.8 per cent, while the S&P 500 has rallied nearly 31 per cent. The Invesco Global Listed Private Equity ETF (PSP) also outperformed the stock, declining only 5.5 per cent over the same period and dipping 8.6 per cent year-to-date, compared to KKR’s double-digit losses.
Among the 20 analysts covering the stock, the current 'Moderate Buy' consensus comprises 14 'Strong Buy' ratings, two 'Moderate Buys', three 'Holds', and one 'Strong Sell'. This configuration marks a departure from the previous month, when the overall rating stood at 'Strong Buy'. The mean price target for the stock is now set at $124.79, implying a 25.5 per cent upside from current levels, with a street-high target of $153 suggesting potential upside of 53.8 per cent.
Barclays PLC maintained an 'Overweight' rating on KKR on May 7 but lowered its price target to $122, citing a more cautious near-term outlook. Looking ahead, analysts project that KKR’s diluted earnings per share for the current fiscal year, ending in December, will grow by 28 per cent to $5.40. The company’s earnings surprise history remains mixed, with beats in two of the last four quarters and misses in the other two.
