A month has gone by since the last earnings report for BlackRock (BLK). Shares have added about 8.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is BlackRock due for a pullback? 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 Q3 Earnings Beat Estimates as Revenues Rise
BlackRock’s third-quarter 2019 adjusted earnings of $7.15 per share surpassed the Zacks Consensus Estimate of $6.95. However, the figure was 4.9% lower than the year-ago quarter’s number.
Results benefitted from an improvement in revenues. Moreover, growth in AUM, driven by net inflows, was a positive. However, higher expenses hurt results to some extent.
Net income attributable to BlackRock (on a GAAP basis) was $1.12 billion, declining 8% from the prior-year quarter.
Revenues Improve, Expenses Rise
Revenues for the reported quarter (on a GAAP basis) were $3.69 billion, increasing 3.2% year over year. The upside stemmed from an increase in investment advisory, administration fees and securities lending revenues, and technology services revenues. However, the reported figure missed the Zacks Consensus Estimate of $3.73 billion.
Total expenses amounted to $2.19 billion, up marginally year over year. The increase was due to rise in almost all components, except for direct fund expenses, and general and administration (G&A) costs.
Non-operating expenses (on a GAAP basis) were $42 million against non-operating income of $33 million recorded in the year-ago quarter.
BlackRock’s adjusted operating income was $1.50 billion, up 7.3% year over year.
Net Inflows Support AUM Growth
As of Sep 30, 2019, AUM totaled nearly $6.96 trillion, reflecting rise of 8.1% year over year. Furthermore, in the reported quarter, the company witnessed long-term net inflows of $52.26 billion.
During the quarter, the company repurchased shares worth $100 million.
G&A expenses in the fourth quarter are expected to be seasonally higher than the first three quarters of this year.
Growth in technology services revenues is expected to be in low to mid-teens range over the long term.
The company expects effective tax rate in the fourth quarter to be 23%.
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 D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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. 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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