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BlackRock (BLK) Down 11.7% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for BlackRock (BLK). Shares have lost about 11.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is BlackRock due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

BlackRock Lags on Q2 Earnings as Revenues Decline

BlackRock’s second-quarter 2019 adjusted earnings of $6.41 per share lagged the Zacks Consensus Estimate of $6.52. Moreover, the figure was 3.8% lower than the year-ago quarter’s number.

Results were hurt by a decline in revenues along with higher expenses. However, growth in AUM supported results to some extent.

Net income attributable to BlackRock (on a GAAP basis) was $1 billion, declining 6.5% from the prior-year quarter.

Revenues Decline, Expenses Rise

Revenues for the reported quarter (on a GAAP basis) were $3.52 billion, declining 2.2% year over year. This downside stemmed from a decrease in almost all components of revenues except for technology services revenues. Moreover, the reported figure missed the Zacks Consensus Estimate of $3.55 billion.

Total expenses amounted to $2.25 billion, up nearly 3.7% year over year. This growth was due to rise in almost all components except for direct fund expenses.

Non-operating income (on a GAAP basis) was $57 million versus non-operating expenses of $24 million recorded in the year-ago quarter.

BlackRock’s adjusted operating income was $1.28 billion, down 11.4% year over year.

Net Inflows Support AUM Growth

As of Jun 30, 2019, AUM totaled nearly $6.8 trillion, reflecting rise of 8.6% year over year. Furthermore, during the reported quarter, the company witnessed long-term net inflows of $125.37 billion.

Share Repurchases

During the quarter, the company did not repurchase any shares.

Outlook

Growth in technology services revenues is expected to be in low to mid-teens range over the long term.

It expects effective tax rate for 2019 to be 24%.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, BlackRock has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, BlackRock has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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