BlackRock (BLK) Beats Q2 Earnings on Strong Inflows - Analyst Blog


Top-line growth aided by an increase in assets under management (AUM) drove BlackRock, Inc. 's ( BLK ) second-quarter adjusted earnings of $4.89 per share. It surpassed the Zacks Consensus Estimate of $4.46 for the third consecutive quarter.  Further, this was up 18% from $4.15 per share earned in the year-ago quarter.

Our proven model had also predicted that BlackRock will post an earnings beat as it had the right combination of two key ingredients - a positive Earnings ESP and a favorable Zacks Rank #2 (Buy).

Better-than-expected results were driven by revenue growth, partly offset by higher expenses. Further, rise in AUM was a tailwind.

After considering certain non-recurring items, net income for BlackRock came in at $808 million or $4.72 per share, up from $729 million or $4.19 per share in the year-ago quarter.

Quarter in Detail

Total revenue (on a GAAP basis) was $2.78 billion, increasing 12% from the prior-year quarter. Higher long-term net inflows, increase in performance fees and strength in BlackRock Solutions were the primary growth drivers. Moreover, the reported figure came in higher than the Zacks Consensus Estimate of $2.70 billion.

Total expenses were $1.66 billion, up 1% on a year-over-year basis. The increase was mainly due to a rise in employee compensation and benefits, and direct fund expenses, partially offset by a decrease in general and administration expenses.

Non-operating expenses, net of non-controlling interests, were recorded at $20 million, compared with non-operating income of $12 million in the prior-year quarter.

BlackRock's operating income, on a GAAP basis, was $1.12 billion, increasing 32% from the year-ago quarter.

AUM totaled $4.59 trillion as of Jun 30, 2014, up 19% from the year-ago period. Further, the company witnessed total long-term inflows of $38.0 billion.

Share Repurchases

BlackRock bought back shares worth about $250 million in the reported quarter.

Our Viewpoint

BlackRock's initiatives to improve exchange-traded fund (ETF) business are commendable and will likely support its top line in the upcoming quarters. Moreover, the company's organic as well inorganic growth strategies, and steady capital deployment activities seem impressive. On the flip side, continuously increasing expenses and high dependence on fee-based revenues remain causes of concern.

Among other investment managers, Ameriprise Financial, Inc. ( AMP ) and Waddell & Reed Financial, Inc. ( WDR ) are scheduled to release results on Jul 29, while Invesco Ltd. ( IVZ ) will report on Jul 31.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ETF , BLK , IVZ , WDR , AMP

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