BlackRock Inc.'s (BLK) first quarter 2012 adjusted earnings came in at $3.16 per share, substantially ahead of the Zacks Consensus Estimate of $3.03. The results also compare favorably with the prior-quarter earnings of $3.06 as well as the prior-year quarter earnings of $2.96.
GAAP net income came in at $572 million or $3.14 per share, as against $555 million or $3.05 per share in the prior quarter and $568 million or $2.89 per share in the year-ago quarter.
Better-than-expected results were primarily attributable to higher operating income and improved top line. Moreover, enhanced assets under management were among the positives.
Quarter in Detail
BlackRock’s total revenue in the quarter was $2.25 billion, up 1% from the prior quarter but down 1% from the prior-year quarter. Total revenue surpassed the Zacks Consensus Estimate of $2.22 billion.
Total expenses inched up 1% sequentially but dipped 3% year over year to $1.43 billion. The sequential rise was driven by elevated employee compensation and benefits as well as direct fund expenses, partially offset by lower general and administration expenses. On a year-over-year basis, the expenses declined due to lower distribution and servicing costs as well as general and administration expenses.
Non-operating income, net of non-controlling interests, amounted to $20 million compared with $19 million in the prior-year quarter. Non-operating income for the quarter included a gain of $55 million from investments in mortgage and private equity funds, which were partly mitigated by elevated net interest expense.
The year-over-year increase in net interest expense reflected the $1.5 billion debt issuance in the second quarter of 2011 in connection with the repurchase of Bank of America Corp.'s (BAC) remaining ownership interest in BlackRock.
Adjusted operating income summed up to $825 million, down 2% sequentially but marginally up from the prior-year quarter.
BlackRock’s operating income on a GAAP basis stood at $815 million, up 1% from $808 million in the prior quarter and 2% from $798 million in the year-ago quarter.
Assets Under Management
Assets under management totaled $3.68 trillion as of March 31, 2012, up 5% sequentially and 1% from the year-ago period. The sequential increase was due to strong inflows of $25.7 billion in long-term products. Moreover, improved market and investment performance and acquisition of Claymore Investments resulted in a boost in the AUM growth.
Acquisition News
On March 7, BlackRock completed the acquisition of Claymore Investments, which was announced in January. The acquisition supplemented $7.3 billion of AUM, mostly in equity and fixed income and resulted in addition of 38 exchange traded funds (ETFs) to the company’s iShares brand. Moreover, the company’s presence in Canada was also enhanced.
Our Viewpoint
Better-than-expected results show the financial strength of BlackRock. Despite the weak economic recovery and increasing competition weighing down the company’s profitability, the recent acquisition of Claymore and the growing need for risk management solutions within the financial industry is expected to benefit its financials in the long run.
BlackRock currently retains a Zacks #3 Rank, which translates into a short-term Hold' rating.
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