It has been about a month since the last earnings report for BlackRock (BLK). Shares have added about 11.9% 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 drivers.
BlackRock Q1 Earnings Miss Estimates as AUM Declines, Costs Rise
BlackRock’s first-quarter 2020 adjusted earnings of $6.60 per share lagged the Zacks Consensus Estimate of $6.69. The figure was marginally lower than the year-ago quarter’s number.
Results were primarily hurt because of an increase in expenses. Moreover, long-term net outflows resulted in a decline in AUM. Nevertheless, higher revenues supported results to some extent.
Net income attributable to BlackRock (on a GAAP basis) was $806 million, down 23.5% from the prior-year quarter.
Revenues Improve, Expenses Rise
Revenues (on a GAAP basis) were $3.71 billion, increasing 10.9% year over year. The upside stemmed from an increase in all components of revenues. Moreover, the reported figure surpassed the Zacks Consensus Estimate of $3.58 billion.
Total expenses amounted to $3.03 billion, up 43.2% year over year. The increase was due to a rise in all cost components.
Non-operating expenses (on a GAAP basis) were $71 million against non-operating income of $125 million recorded in the year-ago quarter.
BlackRock’s adjusted operating income was $1.27 billion, up 3.2% year over year.
AUM Declines due to Long-term Net Outflows
As of Mar 31, 2020, AUM totaled $6.47 trillion, reflecting a decline of nearly 1% year over year. In the reported quarter, the company witnessed long-term net outflows of $18.66 billion.
In the reported quarter, BlackRock repurchased shares worth $400 million.
Growth in technology services revenues is expected to be in low to mid-teens range over the long term.
The company expects to repurchase at least $300 million worth of shares per quarter in 2020.
It anticipates effective tax rate of 23% for 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
At this time, BlackRock has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. 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 trending upward for the stock, and the magnitude of this revision 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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