(Reuters) — Private equity firm KKR & Co LP (KKR.N) reported higher-than-expected earnings on Tuesday, benefiting from a steady rise in oil prices and stronger U.S. equity and credit markets.
New York-based KKR said it had earned economic net income of 23 cents a share in the second quarter, down from 88 cents a year earlier but well above analysts’ forecasts of 5 cents, according to Thomson Reuters I/B/E/S.
Economic net income is a key metric for U.S. private equity firms that accounts for unrealized gains or losses in investments.
KKR’s distributable earnings – part of which funds its dividend payouts – rose to $507.6 million after taxes in the quarter, the third highest ever in its history, said a source familiar with the matter but who declined to be named.
The jump in distributable earnings was aided by steadying financial markets, which provided KKR with an opportunity to sell out of investments, the source said.
Underscoring the turnaround in financial markets, KKR’s performance income, which tracks gains from investments, stood at $328.6 million in the second quarter, reversing a loss of $124.9 million in the previous three months.
While Britain’s shock decision to leave the European Union in June briefly roiled global financial markets and knocked sterling GBP= to a 31-year low, KKR said it was largely insulated from the fallout.
“We proactively hedge our currency exposure, so the impact of the pound at the end of the quarter was quite modest,” said William J. Janetschek, chief financial officer at KKR.
Healthier financial markets also boosted the performance of KKR’s private equity fund during the quarter.
Its private equity investment returns were bolstered in part by its investment in U.S. food distributor US Foods Holding Corp (USFD.N). US Foods had listed on the stock market in May and is trading slightly above its initial public offer price.
KKR reiterated that shareholders would receive a cash distribution of 16 cents per share.
The better-than-expected earnings report helped KKR’s shares to rise 3.5 percent by mid-day, outperforming the S&P 500 index .SPX which was flat on the day. For the year, however, KKR stock is down 7.6 percent, compared with a 6 percent rise in the S&P 500.
Blackstone Group LP (BX.N), KKR’s rival and the world’s biggest alternative asset manager, also surprised analysts last week by posting stronger-than-expected quarterly results.