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What's in the Cards for BlackRock (BLK) in Q1 Earnings?

Zacks Equity Research

BlackRock, Inc. BLK is slated to report first-quarter 2019 results on Apr 16, before the opening bell. Its revenues and earnings for the to-be-reported quarter are projected to decline year over year.

In the last reported quarter, the company’s earnings lagged the Zacks Consensus Estimate. Results were hurt by a decline in revenues and lower assets under management (AUM).

However, the company boasts a decent earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 2.4%.

BlackRock, Inc. Price and EPS Surprise
 

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

BlackRock’s business activities and prospects in the to-be-reported quarter encouraged analysts to revise earnings estimates upward. The Zacks Consensus Estimate for earnings of $6.20 increased 2.5% over the past 30 days. However, the figure reflects a year-over-year decline of 7.5%.

The Zacks Consensus Estimate for sales for the first quarter is pegged at $3.32 billion, which reflects a decline of 7.4% year over year.

Looking at the company’s price performance, over the past three months, its shares have gained 10% compared with 11.3% growth recorded by the industry.

Will this price performance rally continue post first-quarter earnings release? To a great extent, it depends on whether or not the company will be able to beat earnings estimates this time around.

Before we take a look at what our quantitative model predicts, let’s discuss the factors that are likely to impact first-quarter results.

Factors to Influence Q1 Results

BlackRock remains a dominant player in the ETF market, given its continued investments in the U.S. iShare core ETFs. Moreover, as investors are increasing allocations toward ETFs instead of alternative investments to reduce management costs, the company’s iShares inflows are expected to have remained strong in the first quarter. Thus, while unfavorable foreign currency adjustments during the quarter might have had an adverse impact on AUM, total AUM is likely to improve, driven by steady inflows. The Zacks Consensus Estimate for total AUM for the first quarter is pegged at $6.47 trillion, reflecting growth of 2.4% year over year.

Despite an expected increase in assets during the first quarter, investment advisory, administration fees and securities lending revenues, which constitute more than 80% of the company’s total revenues, is expected to decline. The Zacks Consensus Estimate for the same is $2.75 billion, reflecting a 23.2% year-over-year decline.

Moreover, performance fee, which is also a major revenue component, is likely to decrease during the quarter to be reported. The Zacks Consensus Estimate for performance fees for the first quarter is pegged at $41.65 million, which represents a decline of 40.5% from the prior-year quarter.

BlackRock might witness an increase in costs in the first quarter. The company’s expenses remained elevated over the last few years. In fact, higher compensation, as well as marketing costs (related to the company’s brand campaign), along with its plans for improving product offerings, may result in an increase in expenses.

Earnings Whispers

According to our quantitative model, it cannot be conclusively predicted whether BlackRock will be able to beat the Zacks Consensus Estimate in the first quarter. This is because it does not have 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 0.00%.

Zacks Rank: BlackRock currently carries a Zacks Rank #2 (Buy). While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings surprise call.

Stocks Worth a Look

Here are some finance stocks that you may want to consider as these have the right combination of elements to post an earnings beat this quarter, per our model.

BankUnited, Inc. BKU has an Earnings ESP of +1.89% and carries a Zacks Rank of 3 at present. The company is slated to release results on Apr 24.

Associated Banc-Corp ASB is expected to release results on Apr 25. It presently has an Earnings ESP of +0.55% and a Zacks Rank #3.

SVB Financial Group SIVB is slated to release results on Apr 25. It has an Earnings ESP of +0.42% and currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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