Volatility clouds KKR's outlook after forecast-beating first quarter

By Isla Binnie and Pritam Biswas

NEW YORK, ‌May 5 (Reuters) - KKR warned ​on Tuesday ​that market volatility had dimmed its growth outlook, even as it reported first-quarter earnings that beat Wall Street expectations on rising deal flows and growing fees from managing client money.

The buyout group said income ‌from selling assets rose more than 50% in the quarter, boosting the proceeds it paid to ⁠shareholders and its own dealmakers. It raised $28 billion of fresh capital, driven by flows into the credit business which is the biggest segment of ‌its $758 billion under management.

But Chief Financial Officer ‌Robert Lewin said investors should look for lower income per share in 2026 than the $7 per share previously expected.

"While we continue to generate very strong outcomes, we do have modestly less visibility today than what our budget would ​have suggested at this point in the year. As a result, if you are handicapping our ability to reach $7 per share, we do think it is more likely that we land below that level," Lewin told analysts on ⁠a conference call.

Shares rose in pre-market trading after the earnings were released, but dipped later in the morning and were last down around 2%.

KKR and its peers ​have had a bumpy ride on the stock market over the past year as investors fretted about future growth, artificial intelligence disrupting their portfolio companies, and lending standards in private credit.

War ​in the Middle East then rattled markets and cast a pall ‌over forecasts for brisk dealmaking.

Co-Chief Executive Scott Nuttall said on Tuesday "if the backdrop in terms of war, energy prices et cetera is a bit uncertain or uncomfortable" he may not want to ⁠sell an asset into that environment.

BUYING OPPORTUNITY

Fees from managing money for clients, which KKR earns regardless of how investments perform, jumped 30%, to $1.2 billion in the first quarter. Overall adjusted net income hit $1.2 billion, which translated to $1.39 per share, compared with expectations for $1.29 per share ⁠in a LSEG poll.

Gross returns from its private equity and credit funds slowed. The traditional private equity portfolio returned 1% in the first ​quarter, compared with 10% across the past 12 months.

Its debt funds dipped into negative territory, with composites for both its leveraged credit and private credit strategies showing returns of -1% versus 5% and 4% respectively in the last 12 months.

"Overall, these numbers were better than consensus expectations ‌primarily due to impressive monetization activity," as well as lower taxes and better earnings from fees, J.P. Morgan analysts said. The analysts said they have an overweight rating on the ‌stock, indicating they expect it to outperform.

KKR's shares have recovered some ground since reaching a trough in March, but are still trading around ⁠20% lower on the year.

Nuttall said he, his ‌co-Chief Executive Joe Bae, and "multiple members of ​our board" had all taken advantage of what they see as a discount to buy the stock.

(Reporting by Isla Binnie in New York and Pritam Biswas in Bengaluru; Editing by Arun Koyyur and ‌Chris Reese)

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