On Aug 21, 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 revenues are the causes of concern.
Why the Neutral Stance?
BlackRock's second-quarter 2013 adjusted earnings came in at
$4.15 per share, substantially surpassing the Zacks Consensus
Estimate of $3.82. Results were primarily aided by increased top
line, partly offset by higher operating expenses. Moreover,
augmented assets under management (AUM) came as a positive.
The Zacks Consensus Estimate for 2013 remained stable at $15.92
per share over the last 30 days. However, for 2014, the Zacks
Consensus Estimate went down marginally to $17.52 per share over
the same time frame. Therefore, the company carries a Zacks Rank
BlackRock's capital deployment activities have been impressive.
Earlier, in 2013, the board of directors of the company approved
an increase in share repurchase authorization, allowing it to
repurchase upto 10.2 million shares. For the six months ended Jun
30, 2013, the company repurchased 1.9 million common shares in
open market transactions under its existing share repurchase
Further, BlackRock has expanded largely through both domestic and
overseas acquisitions. Recently, in Jul 2013, BlackRock acquired
Credit Suisse's European ETF operations, which reflects its ample
acquisition opportunities in the overseas markets.
So far, the acquisition of Barclay's investment management
business remains the biggest deal, which nearly doubled
BlackRock's AUM at that time.
However, BlackRock's increased 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 adversely affected by a
plethora of risks stemming from the international regulatory and
political environment and foreign exchange fluctuations.
Other Major Banks to consider
Some better performing banks worth a look include
Mercantile Bank Corp
). All these carry a Zacks Rank #1 (Strong Buy).
BLACKROCK INC (BLK): Free Stock Analysis
FIRSTBANK ALMA (FBMI): Free Stock Analysis
MERCANTILE BANK (MBWM): Free Stock Analysis
PRIVATEBANCORP (PVTB): Free Stock Analysis
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