On Aug 20, 2014, we issued an updated research report on BlackRock Inc. (BLK). The rise in assets under management (AUM.TO) and opportunistic acquisitions will likely continue to support its revenue growth. However, mounting expenses make us apprehensive.
BlackRock, with its diversified footprint across the globe and strong product mix has significant organic growth prospects. The company’s top line has been growing at a 5-year CAGR of 20.7% (2009-2013), with the trend continuing into 2014.
We believe that BlackRock’s diversified products and revenue mix will enable it to adapt easily to the changing needs of clients. Further, the company’s brand initiatives for the iShares and ETF business will help it expand revenues going forward.
Further, the Zacks Consensus Estimate over the last 30 days has been showing an increasing trend. For 2014, the Zacks Consensus Estimate increased nearly 1% to $19.23 per share, while for 2015, it rose by a penny to $21.39 per share.
On the flip side, mounting operating expenses remain a major concern. BlackRock continues to witness higher expenses due to increased marketing costs as well as a rise in compliance costs. We believe that this would continue to hamper bottom-line growth going forward.
BlackRock now has a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Some better-ranked investment management stocks include AllianceBernstein Holding L.P. (AB), SEI Investments Co. (SEIC) and Cohen & Steers Inc. (CNS). All of these have a Zacks Rank #1 (Strong Buy).