The private equity giant Kohlberg Kravis Roberts reaped gains in the first quarter from selling some of its investments, reporting profit that beat Wall Street’s expectations on Thursday.
But the profit â€" measured as economic net income, which includes unrealized gains from investments â€" was slightly lower than it was in the period a year earlier, chiefly because K.K.R.’s investment portfolio appreciated less than it did in the first quarter of 2013.
The firm said first-quarter economic net income declined 2.7 percent, to $630 million. The earnings after taxes amounted to 82 cents a share, handily exceeding the estimate of 53 cents by analysts surveyed by Standard & Poor’s Capital IQ.
Like other big private equity firms, K.K.R. continued to take advantage of buoyant stock markets to sell its holdings. In the first three months of the year, it held an initial public offering of Pets at Home, a British retailer, and sold shares in an I.P.O. of Santander Consumer USA, the American auto-lending arm of the Spanish banking giant Grupo Santander. It also sold shares in companies it had already taken public, including Jazz Pharmaceuticals and the TV ratings company Nielsen.
Those sales and others helped K.K.R.’s distributable earnings â€" a measure of cash generated by the firm that can be given to shareholders â€" rise 54 percent, to $446.8 million, from the period a year earlier. It said the firm’s realized carried interest, its share of the profit from selling investments made by its funds, more than doubled.
Still, the relatively muted gains in K.K.R.’s investment portfolio put a damper on the results. Its unrealized carried interest, reflecting gains on investments not yet sold, came in at half of the number in the first quarter of 2013.
The firm’s private equity portfolio appreciated 4.5 percent in the first quarter, outpacing the Standard & Poor’s 500-stock index, which rose less than 2 percent, including dividends. A year earlier, however, K.K.R.’s private equity portfolio rose 5.9 percent.
“Our investment portfolio and balance sheet continue to perform, resulting in a 26 percent return on equity over the last twelve months,†Henry R. Kravis and George R. Roberts, co-founders and co-chief executives of K.K.R., said in a statement.
K.K.R. raised more money from investors and acquired a European credit manager, Avoca Capital, helping push its assets under management above $100 billion.
The private equity industry prefers to use nonstandard metrics to report earnings. According to generally accepted accounting principles, K.K.R. earned $210 million in the quarter, 8.6 percent more than a year earlier.
K.K.R. announced a first-quarter dividend of 43 cents a share.
