BMO Capital Initiates Coverage on KKR, Citing Private Equity Strength Amidst Revenue Forecast Concerns

BMO Capital Initiates "Outperform" Rating on KKR Amidst Mixed Outlook

On October 3, 2025, BMO Capital, led by analyst Brennan Hawken, initiated coverage on KKR & Co. Inc. (NYSE: KKR) with an "Outperform" rating. The firm set a price target of $148.00 for the investment giant, suggesting a potential upside of 18.93% from KKR's current trading price. This initiation highlights KKR's leadership in private equity and its robust capital markets platform.

Detailed Analysis of BMO Capital's Perspective

KKR, with a market capitalization of $111 billion, received the "Outperform" recommendation primarily due to its strong operating and earnings leverage, which BMO Capital believes positions it favorably for a recovery in global capital markets. The firm emphasized KKR's flagship private equity franchise and its integrated capital markets platform as key strengths, anticipating benefits from increased initial public offering (IPO) and mergers and acquisitions (M&A) activity. KKR reported earnings per share of $1.18 for the third quarter of 2025, surpassing the consensus estimate of $1.14. Quarterly revenue reached $1.86 billion, exceeding the consensus of $1.81 billion. As of June 2025, KKR managed $686 billion in total assets, with $556 billion in fee-earning assets under management (AUM).

Nuanced Market Reaction and Underlying Factors

Despite the positive initiation and strong quarterly earnings, the market's reaction to KKR presents a nuanced picture. While the "Outperform" rating signals potential for capital appreciation, a significant forecasted annual revenue decrease and a bearish options sentiment temper the outlook. Analysts project KKR's annual revenue for 2025 to be around $8.05 billion, representing a substantial 69.51% decline from a previous year's $26.42 billion. This projected reduction raises concerns about long-term growth prospects. Furthermore, the put/call ratio for KKR stood at 1.49, indicating a prevailing bearish sentiment among options traders, as a ratio greater than 1 typically suggests more put options (bearish bets) than call options (bullish bets) are open. This discrepancy between analyst optimism and revenue forecasts, coupled with options market sentiment, suggests potential volatility as investors weigh these divergent indicators.

Broader Context and Strategic Initiatives

KKR's financial performance and strategic moves continue to draw analyst attention. The average one-year price target from 18 analysts is $164.06, implying a potential upside of 31.64% from the current price of $124.63, with a high estimate of $187.00 and a low of $134.06. The consensus recommendation from 22 brokerage firms rates KKR as "Outperform" with an average brokerage recommendation of 1.9.

KKR's ongoing strategic initiatives include significant monetization activity, with over $925 million generated from public secondary sales, strategic transactions, dividends, and interest income during Q3 2025. The firm is also exploring the sale of its 40% stake in Pembina Gas Infrastructure, valued at approximately $7 billion, and has agreed to sell its insurance platform, Integrated Specialty Coverages (ISC), to Onex Partners. These activities underscore KKR's dynamic portfolio management.

However, recent financial reports have also highlighted challenges. For Q1 2025, KKR reported a net loss of $0.21 per share, a notable reversal from a profit of $0.77 per share in the prior year. This loss was largely attributed to one-time issues within its insurance segment, particularly $1.4 billion in net investment-related losses driven by market volatility, credit risks, and legal settlements. Despite these headwinds, the core Asset Management division demonstrated resilience, with Fee-Related Earnings (FRE) rising 22% year-over-year to $0.92 per share, fueled by $31 billion in new fundraising.

Expert Commentary and Future Outlook

Industry analysts generally maintain a positive outlook on KKR's long-term prospects. BMO Capital specifically assesses a favorable risk/reward profile as the market cycle evolves, anticipating accelerating earnings power. The firm's ability to grow fee-related earnings through fundraising momentum and expanding private wealth distribution, alongside the stability provided by its Strategic Holdings and insurance businesses, are seen as crucial drivers.

"BMO Capital views KKR as a leader in private equity, possessing significant operating and earnings leverage that positions it favorably for a recovery in capital markets."

Looking ahead, investors will closely monitor KKR's ability to navigate the substantial forecasted revenue decline while capitalizing on a potential recovery in capital markets. The performance of its core asset management business, particularly its success in new fundraising and deployment of its substantial $116 billion in uncalled capital, will be key indicators. Additionally, the firm's strategic divestitures and acquisitions, such as the potential sale of its stake in Pembina Gas Infrastructure and the expansion of its U.S. presence, will be important factors in assessing its future trajectory and overall financial health. The market will also watch for any stabilization or improvement in the performance of its insurance segment.