BN Earnings Grow By 20% In Q3

Brookfield Corp BN reported $3.78 per share distributable earnings for the past 12 months, up 20% compared to a year ago. Note that this amount is in USD, which represents an earnings yield of 6.5%, or a PE ratio of 15.3. I think this is a very cheap valuation for a company growing earnings 16% CAGR for the past 5 years. Many things are looking great in this quarter:

The asset management business (73% owned by BN) delivered 14% growth in fee-related earnings. This is the high quality earnings that I would like to see growth from, the management fee charged on the Brookfield managed funds.
Earnings from the wealth solution business (insurance) doubled compared to the previous quarter. In the past 12 months this business earned $0.75/share which is close to 20% of the total earnings. This is impressive for a business just started a few years ago. They are now expanding the insurance business to UK and have plans to further expand to Asia (Japan) in the near future, indicating more growth is coming. The management also mentioned that they are on track to further improve the spread earned from insurance floats, from 1.8% to 2%, in the next 12 months. This will bring the earnings of this business up from the current $1.2 billion to $2 billion, equivalent of adding $0.5 to per share earnings (A 13% DE growth just from this one business)
Bought back $1 billion of shares in the past year, this is about 1% of the total share count
$150 billion of deployable capital to capture potential investment opportunities

One thing to notice is that the earnings from operating businesses are slightly down 2% compared to a year ago. I would like to see growth from the operating businesses going forward, which I am hopeful because of the recent rate cut and a better economy. The real estate business seems to start getting better, it just signed 6 million square feet of office and retail leases during the quarter, the rents on the newly signed leases are about 10% higher compared to those leases expiring. I personally don't worry about it too much as the growth in other businesses is more than enough to offset this small decline.

Using the DCF model, I calculated the estimated intrinsic value of BN stock is $79 (CA$111.05), suggesting a potential CAGR of 17% for the next few years. I believe the projected 10% earnings growth and a price/DE ratio of 15 is conservative and BN will likely outperform it:

Latest TTM distributable earnings (DE) of $5.98 Billion
DE growth rate of 10% (5YR AVG 16.13%)
0% Share dilution in the future (5YR AVG dilution was 0.37%)
Future Price/DE ratio of 15 (5YR AVG 12.6)
Discount rate of 10%

With the above valuation in mind, I am happy to keep BN the largest position in my portfolio and do not plan to sell a single share. I will add more to the position if the stock price ever goes down.

You can also see all my past BN stock analysis using this link.

Holdings Disclosure

SoloFIRE BN ownership: 17% of portfolio
SoloFIRE BN Average Cost Paid: CA$44.65
BN price as of writing: CA$80.01
Holding time: 4 years

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DISCLAIMER: Solofire is not a registered financial advisor. This post contains author's personal opinion only and it should NOT be considered financial advice.