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Is an Earnings Beat in Store for BlackRock (BLK) in Q3?

Zacks Equity Research
·4 min read

BlackRock, Inc. BLK is slated to report third-quarter 2020 results on Oct 13, before the opening bell. Its revenues and earnings in the quarter are expected to have improved on a year-over-year basis.

In second-quarter 2020, the company’s earnings surpassed the Zacks Consensus Estimate. Results benefited from an improvement in revenues and a marginal decline in expenses. Further, long-term net inflows resulted in a rise in assets under management (AUM) balance, which was a major positive.

BlackRock has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three and lagged in one of the trailing four quarters, with a surprise of 6%, on average.

BlackRock, Inc. Price and EPS Surprise

 

BlackRock, Inc. Price and EPS Surprise
BlackRock, Inc. Price and EPS Surprise

BlackRock, Inc. price-eps-surprise | BlackRock, Inc. Quote

The company’s business activities and prospects in the third quarter encouraged analysts to revise earnings estimates upward. The Zacks Consensus Estimate for earnings of $7.40 for the to-be-reported quarter has moved marginally upward over the past 30 days. Also, the figure indicates a rise of 3.5% from the year-ago quarter’s reported number.

The consensus estimate for sales is pegged at $3.89 billion, which suggests an increase of 5.4% from the prior-year quarter’s reported number.

Now, before we take a look at what our quantitative model predicts for the to-be-reported quarter, let’s discuss the factors that are likely to have impacted the company’s performance.

Key Factors to Note

BlackRock has been a dominant player in the ETF market, given its continued investments in the U.S. iShare core ETFs. Moreover, with investors increasing allocations toward ETFs instead of alternative investments to reduce management costs, the company’s iShares inflows have been strong over the past several quarters.

Moreover, despite continued fears related to the negative impacts of the coronavirus outbreak, the third quarter witnessed decent asset inflows. Thus, supported by inflows, BlackRock’s AUM is expected to have improved in the quarter.

The Zacks Consensus Estimate for AUM for the third quarter is pegged at $7.80 trillion, indicating a rise of 12% from the year-ago quarter’s reported number.

Notably, driven by an expected increase in AUM, the related fee is also expected to have been positively impacted.

The consensus estimate for total investment advisory, administration fees and securities lending revenues for the to-be-reported quarter is pegged at $3.22 billion, suggesting a year-over-year increase of 8.2%.

However, the consensus estimate for distribution fee of $256 million indicates a decline of 5.2% from the prior-year quarter.

BlackRock’s expenses have been elevated over the past few years. As the company has been continuing with its restructuring initiatives to modify the size and shape of its workforce, and improve operating efficiency, overall costs are expected to have increased in the to-be-reported quarter as well.

Earnings Whispers

According to our quantitative model, chances of BlackRock beating the Zacks Consensus Estimate this time are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — which is required to be confident of an earnings surprise call.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for BlackRock is +3.65%.

Zacks Rank: The company currently carries a Zacks Rank #2 (Buy).

Other Stocks Worth a Look

Here are some other finance stocks that you may want to consider as these too have the right combination of elements to post an earnings beat in their upcoming releases, per our model.

The Earnings ESP for JPMorgan Chase & Co. JPM is +7.90% and it carries a Zacks Rank #3, currently. It is scheduled to report quarterly numbers on Oct 13.

The Goldman Sachs Group, Inc. GS is slated to release earnings figures on Oct 20. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +13.75%.

KeyCorp KEY is slated to release earnings figures on Oct 21. The company currently carries a Zacks Rank #3 and has an Earnings ESP of +22.67%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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