RBC Capital lowers Q3/26 estimates for US alternative asset managers

RBC Capital has reduced its Q3/26 earnings forecasts for U.S. alternative asset managers by 6% due to seasonal factors and rate uncertainties in September, according to analyst Bart Dziarski. The firm anticipates a quieter quarter due to typical third-quarter seasonality, combined with rate uncertainty. Apollo Global Management (NYSE:APO) and Ares Management (NYSE:ARES) are considered best positioned among alternative asset managers, while Carlyle Group (NASDAQ:CG) and TPG (NASDAQ:TPG) are most vulnerable to interest rate fluctuations.

Apollo, with a market capitalization of $67 billion, boasts a P/E ratio of 40.9 and a dividend yield of nearly 2%. Over the past 16 years, APO has consistently paid dividends. InvestingPro highlights 10 additional tips for APO, with the stock maintaining dividend payments for 16 consecutive years. U.S. alternative asset managers currently trade at 13.2 times estimated distributable earnings in 2027, with an expected 20% growth rate and a 4% yield.

This stands in contrast to S&P financials at 13.7 times price-to-earnings, 10% growth, and a 1.6% yield, as well as the S&P 500 at 18.5 times price-to-earnings, 16% growth, and a 1.1% yield. Among RBC Capital's top picks, Brookfield (NYSE:BN), Ares Management, and Blackstone (NYSE:BX) remain favored. The firm remains tactically favorable towards TPG and cautious about Carlyle Group.

Recently, ONEOK received an upgrade to BBB+ long-term issuer default rating from Fitch Ratings, attributed to a $9 billion minority equity injection from Apollo Global Management and ONEOK's acquisition of Brazos Midstream and repayment of over $5 billion in debt. Fitch projects ONEOK's leverage to decline to 3.5x immediately and remain below that threshold, consistent with ONEOK's revised leverage policy.

Concurrently, Apollo Global Management is reportedly negotiating to acquire Johnson & Johnson's orthopedics unit, potentially valuing it at nearly $20 billion. Additionally, Apollo is phasing out certain products at its Eliant Trade Finance platform, following a challenging year for inventory financing, and is converting its $9 billion stake in ONEOK into investment-grade debt securities to finance the acquisition and debt repayment. This report was AI-assisted and reviewed by an editor.