Record Earnings and Tactical Acquisitions Set to Propel Insurance and Asset Management Giant to New Heights

What are the underlying business or industry changes driving this perspective?

• Strong quarterly results indicated record fee-related earnings and after-tax distributable earnings, which could lead to more revenue and earnings growth in the future.
• Introduction of forward-looking segment and financial metric changes expected to enhance transparency and could positively impact investor sentiment and stock valuation due to clearer financial reporting.
• Continued strength in asset management, evidenced by significant new capital raised across various business lines, suggesting robust future management fee income and AUM growth.
• Expansion in the insurance segment with increased pre-tax earnings and strong net inflows, implies potential for continued revenue growth in this segment.
• Strategic initiatives and acquisitions, specifically the full acquisition of Global Atlantic, could unlock additional value and contribute to earnings growth through the expansion of insurance operations and strategic holdings.

How have these above catalysts been quantified?

• Analysts are assuming KKR's revenue will decrease by -13.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 19.7% today to 36.3% in 3 years time.
• Analysts expect earnings to reach $4.4 billion (and earnings per share of $5.0) by about March 2027, up from $3.7 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 25.2x on those 2027 earnings, up from 22.9x today.
• To value all of this in today’s dollars, we will use a discount rate of 8.13%, as per the Simply Wall St company report.

What could happen that would invalidate this narrative?

• The reliance on regulatory approvals for monetization activities could create unpredictability in the company's ability to realize gains, potentially impacting earnings.
• If interest rates decrease, it could lead to reduced customer demand and origination volumes in the insurance sector, thereby affecting revenue.
• The rapid growth and diversification of KKR's infrastructure platform, while positive, also introduces execution risk that could impact future earnings if not managed effectively.
• The competition in Asia and the need for significant capital to develop infrastructure present both an opportunity and a risk, particularly if economic or geopolitical factors in the region change unfavorably, potentially impacting the performance of investments and earnings.
• As KKR expands its organic insurance origination, there is the risk that increasing interest rates or market saturation could dampen growth prospects, potentially affecting revenue streams from this segment.

• The analysts have a consensus price target of $107.68 for KKR based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with this, you'd need to believe that by 2027, revenues will be $12.3 billion, earnings will come to $4.4 billion, and it would be trading on a PE ratio of 25.2x, assuming you use a discount rate of 8.1%.
  
• Given the current share price of $95.15, the analyst's price target of $107.68 is 11.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.