Core Viewpoint - KKR & Co. Inc. has faced significant stock price declines despite strong fundraising and future growth potential, leading to a mixed outlook among analysts [2][6][9] Group 1: Company Overview - KKR & Co. Inc. is a global investment firm based in New York, with a market capitalization of approximately $93.4 billion, focusing on alternative asset management, capital markets, and insurance solutions [1] - The firm allocates capital across various sectors, including real assets, credit, and liquid strategies, serving both institutional and individual clients [1] Group 2: Market Performance - Over the past 52 weeks, KKR's shares have decreased by nearly 35.5%, while the S&P 500 Index has increased by 12.2% [2] - Year-to-date, KKR's stock has declined by 22.2%, contrasting with a modest pullback in the broader market [2] Group 3: Financial Results - On February 5, KKR reported its fourth-quarter 2025 results, revealing an adjusted EPS decline of 15.2% year-over-year to $1.12, which fell short of analysts' expectations of $1.16 [6] - Despite the quarterly results, KKR achieved a record fundraising year in 2025, raising $129 billion, nearly double the amount raised two years prior [7] - Credit strategies set a record of $68 billion, while infrastructure assets surged from $17 billion to $100 billion, and private equity AUM doubled [7] Group 4: Future Outlook - KKR holds $118 billion in dry powder, positioning the company well for future portfolio development [8] - Analysts project a diluted EPS of $6.11 for fiscal year 2026, indicating a year-over-year growth of 38.9% [8] - KKR has beaten EPS expectations in two of the last four quarters, while missing in the other two [8] Group 5: Analyst Sentiment - Despite recent stock pressure, Wall Street maintains an overall "Strong Buy" rating for KKR, with 15 out of 20 analysts recommending a "Strong Buy" [9] - One analyst favors a "Moderate Buy," and four suggest a "Hold" [9]

Group 1 - The concept of "dry powder" refers to having liquid funds available for investment opportunities when they arise, emphasizing the need for stability and liquidity over yield chasing [4][8] - The stock market can experience dips even in a strong economy, suggesting that holding back some investments in S&P 500 ETFs may allow for better purchasing opportunities in the future [5] - Dividend stocks were considered but ultimately rejected due to their potential volatility and risk during adverse market conditions, which does not align with the need for immediate liquidity [7][9] Group 2 - Ultra-short Treasury bills are highlighted as a suitable alternative for "dry powder," as they provide stability and liquidity while offering interest in the current economic environment [8]

Financial Data and Key Metrics Changes - The company reported Q3 AFO of $0.45 per share, a 3% increase from Q3 last year [17] - Q3 cash rental income was $66.1 million, representing a growth of 12.6% compared to the same quarter last year [18] - Annualized cash-based rent for leases in place as of quarter end is $255.6 million, with a weighted average five-year annual cash rent escalator of 1.4% [18] Business Line Data and Key Metrics Changes - The company acquired 28 properties in Q3 for $82 million at a blended cap rate of 6.8%, with a weighted average lease term of 12 years [10] - Over the first 10 months of 2025, the company acquired 77 properties for $229 million, also at a blended 6.8% cap rate [10] - The in-place portfolio has zero exposure to problem retailers or sectors, maintaining a rent coverage of 5.1 times for the majority of the portfolio [6][18] Market Data and Key Metrics Changes - The company has diversified its rent sources, with Olive Garden and LongHorn Steakhouse now accounting for 32% and 9% of rent, respectively, down from a combined 94% at spin-off [8] - 35% of rents now come from sectors outside of casual dining, including automotive service (13%), quick service restaurants (11%), and medical retail (10%) [8] Company Strategy and Development Direction - The company aims to continue its acquisition strategy while maintaining a focus on quality tenants and properties, avoiding sacrificing quality for volume [5] - The company has a strong competitive advantage in its ability to modulate acquisition pace based on the cost of capital [5] - The company is well-positioned with $270 million in combined dry powder to fuel growth before reaching a mid-five times leverage target [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the current acquisition pipeline and the improved debt market, indicating a favorable environment for growth [9][28] - The company has maintained a strong balance sheet with a net debt to Adjusted EBITDA ratio of 4.7 times, near a seven-year low [16] - Management noted that the portfolio remains resilient, with strong occupancy and collection rates, and low bad debt expense [56] Other Important Information - The company has implemented a new disclosure on its website, providing a full list of properties with detailed data to enhance transparency for investors [20] - The company has a healthy fixed charge coverage ratio of 4.7 times and no debt maturities until the end of 2026 [17] Q&A Session Summary Question: On underwriting standards and potential adjustments - Management indicated that they do not foresee lowering their strict underwriting standards, emphasizing the importance of maintaining a high-quality portfolio [23] Question: Funding pipeline with remaining forward equity - Management clarified that the remaining $100 million in forward equity, combined with $170 million in debt capacity and retained cash flow, provides substantial acquisition capacity [24] Question: Assessment of the acquisition environment - Management expressed a favorable view of the current acquisition environment, noting a capable team and a strong balance sheet to support accretive acquisitions [28] Question: Confidence in Darden lease renewals - Management expects very high renewal rates for Darden leases, citing strong coverage and the value of their menu offerings [30] Question: Competition in the net lease sector - Management acknowledged increased competition from private equity but emphasized their diverse sourcing strategy, which includes both large portfolios and smaller acquisitions [45]