It has been about a month since the last earnings report for BlackRock (BLK). Shares have lost about 5% 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 the most recent earnings report in order to get a better handle on the important catalysts.
BlackRock Beats on Q1 Earnings Despite Lower Revenues
BlackRock’s first-quarter 2019 adjusted earnings of $6.61 per share surpassed the Zacks Consensus Estimate of $6.20. However, the figure was 1.3% lower than the year-ago quarter’s number.
Results benefited from a decline in expenses and higher assets under management. However, lower revenues acted as a headwind.
Net income (on a GAAP basis) was $1.05 billion, decreasing 3.3% from the prior-year quarter.
Revenues & Expenses Decline
Revenues for the reported quarter (on a GAAP basis) were $3.35 billion, declining 6.6% year over year. This downside stemmed mainly from decrease in investment advisory, administration fees and securities lending revenues, and investment advisory performance fees.
Total expenses amounted to $2.11 billion, down nearly 4.3% year over year. This decline was due to fall in almost all components except for general and administration costs, and costs related to amortization of intangible assets.
Non-operating income (on a GAAP basis) was $125 million compared with non-operating expenses of $16 million recorded in the year-ago quarter.
BlackRock’s adjusted operating income was $1.23 billion, down 10.5% year over year.
Higher AUM & Inflows
As of Mar 31, 2019, AUM totaled nearly $6.5 trillion, reflecting rise of 3.1% year over year. Furthermore, during the reported quarter, the company witnessed long-term net inflows of $59 billion.
Share Repurchase Update
During the quarter, BlackRock repurchased shares worth $1.6 billion.
Growth in technology services revenues is expected to be in low to mid-teens range over the long term.
Management expects 2019 G&A expenses to be essentially flat to its core level of spend in 2018.
It expects effective tax rate for 2019 to be 24%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, BlackRock has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile 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.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise BlackRock has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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