BlackRock’s BLK efforts to restructure the equity business, along with its robust assets under management (AUM) balance, will likely keep aiding the top line. Given its earnings strength and solid liquidity position, the company is expected to sustain efficient capital distributions in the future, thus enhancing shareholder value.
The Zacks Consensus Estimate for BLK’s current-year earnings has been revised upward over the past 30 days. This reflects that analysts are optimistic regarding its earnings growth potential.
However, persistently rising expenses (mainly due to higher administration costs) are expected to hurt the company’s bottom line.
Looking at its fundamentals, BlackRock’s AUM witnessed a five-year (2018-2023) compound annual growth rate (CAGR) of 10.9%, with the uptrend continuing in the first six months of 2024. Over the same period, the company’s revenues (on a GAAP basis) saw a CAGR of 4.7%.
Given BLK’s efforts to strengthen the iShares and ETF operations, and increased focus on the active equity business, its top line is expected to be positively impacted. We project total revenues to grow 10.2%, 12.4% and 17.5% in 2024, 2025 and 2026, respectively. Our estimate for total AUM indicates a CAGR of 7% over the three years ended 2026.
BlackRock has expanded largely via acquisitions — both domestic and overseas. In June 2024, the company agreed to acquire Preqin for $3.2 billion, which marks a milestone in its strategy to enhance its private markets capabilities by integrating investments, technology and data across the entire portfolio. In May, BlackRock completed the deal to acquire the remaining 75% stake in SpiderRock, which will enhance its separately managed accounts offerings.
In January, BLK agreed to acquire Global Infrastructure Partners. In 2023, the company acquired London-based Kreos Capital. Also, it agreed to form a joint venture with Jio Financial Services Limited, named Jio BlackRock, which is set to revolutionize India's asset management industry.
Apart from these, over the years, the company has acquired several firms across the globe, thus expanding its footprint and market share. Nonetheless, the acquisition of Barclays Global Investors in 2009 has been the biggest deal by far. With a strong liquidity position, BLK is well-positioned to grow further through buyouts.
However, BlackRock’s total expenses increased, seeing a CAGR of 5.8% over the last five years (ended 2023) mainly due to a rise in general and administration costs. The uptrend in expenses continued in the first six months of 2024. Overall costs are expected to be elevated in the near term. Management expects core G&A expenses in 2024 to increase in the low to mid-single-digit percentage range.
BlackRock is a geographically diversified company with a presence in almost all the major markets of the world. Its dependence on overseas revenues has been gradually increasing over the past few years. Despite generating just about one-third of its revenues from overseas markets, a number of risks stemming from regulatory and political environments, foreign exchange fluctuations and the performance of the regional economy can affect its top-line growth.
Stocks to Watch
A couple of stocks from the same space worth a look at are Hamilton Lane HLNE and Janus Henderson Group JHG.
Earnings estimates for HLNE for the current fiscal year have been revised upward over the past 30 days. In the past six months, HLNE shares have gained more than 15%.
Earnings estimates for Janus Henderson have been revised north for 2024 over the past 30 days. JHG shares have rallied more than 10% in the past six months.
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Today, See These 5 Potential Home Runs >>BlackRock, Inc. (BLK) : Free Stock Analysis Report
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Hamilton Lane Inc. (HLNE) : Free Stock Analysis Report
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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 Nasdaq, Inc.
