Will Brookfield Earnings Stay Strong?

Brookfield Asset Management (BN 0.75%) will release its quarterly report on Friday, and investors haven't been quite sure what to make of the company's prospects lately, pushing shares up and down almost aimlessly so far this year. But with Brookfield earnings poised to jump from year-ago levels, you should know whether the company has real growth potential or whether any gains will merely be a one-time event in a slower-growth environment.

Brookfield Asset Management has a portfolio of diverse properties, ranging from real estate investments to power generation and venture finance. That flexibility makes it harder to assess the company's prospects, but it makes Brookfield nimbler in moving toward the most lucrative opportunities available. Let's take an early look at what's been happening with Brookfield Asset Management over the past quarter and what we're likely to see in its quarterly report.

Stats on Brookfield Asset Management

Source: Yahoo! Finance.

How will Brookfield earnings keep growing?
In recent months, analysts have gotten a lot more optimistic about the long-run prospects for Brookfield earnings. Although they've only boosted June-quarter estimates by $0.03 per share, much larger jumps of almost 85% for the full 2013 year and 65% next year appear much more promising. Yet the stock has actually dropped 3% since early May, suggesting that the news isn't as significant as it appears at first glance.

The June quarter was a tough one for the real-estate business generally, as many fear that rising interest rates could put a damper on residential and commercial real estate construction activity. The drop in Brookfield's share price coincided with the bond market's substantial drop, but Brookfield managed to avoid the larger 9% drop in the real-estate focused Vanguard REIT Index ETF (VNQ -0.73%).

Brookfield held up better than some of its peers in part because of its greater diversity and in part because of its ability to jump on opportunistic deals. In June, the company and its Brookfield Infrastructure Partners (BIP 2.04%) affiliate sold off its Longview Timber business to forest-products giant Weyerhaeuser (WY -1.41%) for $2.65 billion. The deal gave Weyerhaeuser valuable high-quality timber properties in the strategically important Pacific Northwest, but it also helped Brookfield get out of a potentially dangerous situation, as infestations of the mountain pine beetle have already devastated British Columbian forests and could threaten timberlands throughout the western part of North America.

In addition, Brookfield made its already complex corporate structure even more complicated during the quarter, spinning off its commercial real-estate business into the newly public Brookfield Property Partners (BPY) entity. Brookfield Property announced a $1.1 billion deal earlier today with industrial-distribution facility owner Industrial Developments that will add to its existing portfolio of related assets, and with Brookfield retaining a greater than 50% stake in Brookfield Property, it will benefit as well from the affiliate's success.

In the Brookfield earnings report, be sure to look at all of the company's various affiliates to get the complete picture of the business. All the moving pieces make Brookfield a challenge to evaluate, but they also help drive Brookfield's long-term prospects in a positive direction and give the company its best chance to keep its earnings strong well into the future.

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