Goldman Sachs Upgrades KKR (KKR) to Buy, Sees 'Accelerating Harvesting'

Goldman Sachs upgraded KKR (NYSE: KKR) from Neutral to Buy with a price target of $19.50 (from $16.50).

The firm expects shares to outperform citing: 1) Post significant 4Q12 realization activity, the 2006 Fund has substantially filled the "netting hole" pushing this $16 bn fund closer to "cash" carry mode and supporting accelerating distributions in ‘13; 2) A $6.5 bn balance sheet offers strategic and financial flexibility to diversify the firm via seeding new funds and new acquisitions; 3) Valuation is attractive with the implied performance fee multiple at 1.3X vs. the group's 2.7X, suggesting investors undervalue the firm’s cash carry-generating potential in 2013.

Goldman lowered 2012 ENI estimate to $2.14 from $2.80 on lower portfolio performance in 4Q12, but raised 2013/2014 ENI estimates to $2.40/$2.55 on a better outlook for fund appreciation in 2013. The firm raiseed 2013/2014 distribution forecasts to $1.19/$1.20, well ahead of the Street's $1.06/$1.02.

For an analyst ratings summary and ratings history on KKR click here. For more ratings news on KKR click here.

Shares of KKR closed at $15.54 yesterday.

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