A month has gone by since the last earnings report for BlackRock (BLK). Shares have added about 3.8% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
BlackRock Beats on Q2 Earnings, Revenues & AUM Rise
BlackRock’s second-quarter 2020 adjusted earnings of $7.85 per share hugely surpassed the Zacks Consensus Estimate of $6.90. The figure reflects a rise of 22.5% from the year-ago quarter’s number.
Results benefited from an improvement in revenues. Also, expenses declined marginally. Further, long-term net inflows resulted in a rise in assets under management (AUM) balance, which was a major positive for the company.
Net income attributable to BlackRock (on a GAAP basis) was $1.21 billion, up 21% from the prior-year quarter.
Revenues Improve, Expenses Decline Marginally
Revenues (on a GAAP basis) were $3.65 billion, increasing 3.5% year over year. The upside stemmed from an increase in almost all components of revenues, except for distribution fees, and advisory and other revenues. Moreover, the reported figure surpassed the Zacks Consensus Estimate of $3.58 billion.
Total expenses amounted to $2.24 billion, down marginally from the year-ago quarter. The decline was due to a fall in direct fund expenses, and general and administration costs.
Non-operating income (on a GAAP basis) was $357 million, up from $57 million recorded in the year-ago quarter.
BlackRock’s adjusted operating income was $1.41 billion, up 10% year over year.
Net Inflows Support AUM Growth
As of Jun 30, 2020, AUM totaled $7.32 trillion, reflecting a rise of 6.9% year over year. In the reported quarter, the company witnessed long-term net inflows of $62.21 billion.
Share Repurchase Update
The company repurchased shares worth $1.1 billion in the reported quarter.
Growth in technology services revenues is expected to be in low to mid-teens range over the long term.
Core general and administration expenses in 2020 are expected to be up 2% year over year.
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 fresh estimates.
At this time, BlackRock has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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 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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