On May 23, 2013, we reiterated our long-term recommendation on
) at Neutral based on its improved capital deployment activities
and acquisition plans. However, an elevated cost structure and
high dependence on fee-based revenue are the causes of concern.
Why the Neutral Stance?
BlackRock's first-quarter 2013 adjusted earnings came in at
$3.65, surpassing the Zacks Consensus Estimate of $3.59. Results
were primarily driven by top-line growth, partially
offset by higher operating expenses. Moreover, Assets Under
Management (AUM) showed a decent improvement.
The Zacks Consensus Estimate for 2013 rose 3.3% to $16.01 per
share over the last 60 days. For 2014, the Zacks Consensus
Estimate also went up 3.3% to $18.26 per share over the same time
frame. Hence, the company currently has a Zacks Rank #2 (Buy).
BlackRock's capital deployment activities have been impressive.
Earlier, in 2013, the company approved an increase in its share
repurchase authorization, allowing it to repurchase upto 10.2
million shares of the common stock.
Moreover, BlackRock has expanded largely through acquisitions.
Recently, it entered into a definitive agreement with MGPA, an
independent private-equity property investment advisory firm, to
purchase the latter. So far, the acquisition of Barclay's
investment remains the biggest deal, which nearly doubled
BlackRock's AUM at that time. Further, BlackRock acquired Credit
Suisse's European ETF operations, which reflects its ample
acquisition opportunities in the overseas markets.
However, BlackRock's dependence on investment advisory,
administration fees and securities lending can adversely impact
the company's financials due to changes in AUM owing to market
fluctuations, regulatory changes or foreign exchange
Moreover, BlackRock is a geographically diversified company.
Owing to this, its top-line growth can be negatively affected by
a plethora of risks stemming from the international regulatory
and political environment and foreign exchange fluctuations.
Other Major Banks to consider
Some other banks worth a look include
AllianceBernstein Holding L.P
GAMCO Investors, Inc
Virtus Investment Partners, Inc
). All these carry a Zacks Rank #1 (Strong Buy).
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