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On Wednesday, Ares Management, L.P. (NYSE: NYSE:ARES) shares received an updated price target from Jefferies, now set at $139, an increase from the previous target of $127. The firm maintained its Hold rating on the company's stock.
Jefferies adjusted the price target following a revision of Ares Management's second-quarter and full-year 2024 income estimates. The forecast for the company's realized income per share for the second quarter was lowered to $0.95 from $0.97, and the full-year estimate was decreased to $4.24 from $4.37.
The revision reflects a reduction in net performance fees and a decrease in investment income. Jefferies anticipates that Ares Management's Fee-Related Earnings (FRE) for the second quarter will be around $320 million, slightly down from the previous estimate of $325 million.
Moreover, net realized performance fees for the same period are expected to be $35 million, down from the prior estimate of $37 million but up from $10 million in the previous quarter.
Jefferies also noted that the projected FRE margin for the second quarter is 44.3%, up from the previous forecast of 43.6%, and compares favorably to the 42.1% margin reported in the first quarter of 2024. The full-year FRE margin is expected to remain at 42.2%, aligning with the company's investor day guidance of a 0-150 basis points margin expansion each year.
The update further incorporates the impact of Ares Management's June equity issue, which raised $356 million through the issuance of 2.65 million shares at $134.07 each. Fundraising for 2024 is anticipated to be lower than the $74.5 billion raised in 2023, partly due to a lack of flagship funds in the market.
At the investor day in May, Ares Management outlined its strategy up to 2028, with a focus on achieving compounded annual growth rates (CAGR) of 16-20% for FRE and 20-25% for Realized Income (RI).
InvestingPro Insights
Following the recent price target update by Jefferies on Ares Management (NYSE:ARES), current metrics from InvestingPro provide additional context for investors. With a market capitalization of $42.12 billion and a P/E ratio standing at a high 59.01, Ares Management is trading at a significant earnings multiple. Despite this, the company has demonstrated a commitment to shareholder returns, having raised its dividend for 4 consecutive years and maintained payments for 11 consecutive years, which is reflected in a solid dividend yield of 2.76%.
InvestingPro Tips suggest that while Ares has been profitable over the last twelve months, analysts have revised their earnings downwards for the upcoming period. This sentiment is echoed in the recent adjustments to income estimates by Jefferies. Additionally, Ares Management's Price / Book ratio is relatively high at 23.83, which could indicate that the stock is priced at a premium compared to its book value. Investors may find these metrics particularly relevant when assessing the company's current valuation and future prospects.
For those interested in further analysis and additional InvestingPro Tips, including insights into Ares Management's financial performance and stock valuation, more information can be found at Investing.com/pro/ARES. Take advantage of the special offer using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. With 10 more InvestingPro Tips available, this is an invaluable resource for investors looking to make informed decisions.
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