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Why Is BlackRock (BLK) Down 2.4% Since Last Earnings Report?

It has been about a month since the last earnings report for BlackRock (BLK). Shares have lost about 2.4% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is BlackRock due for a breakout? 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's Q3 Earnings Beat Estimates as Revenues Rise

BlackRock's third-quarter 2018 adjusted earnings of $7.52 per share outpaced the Zacks Consensus Estimate of $6.93. Further, the bottom line was 27% higher than the year-ago quarter.

Results benefited from an improvement in revenues, rise in AUM and steady long-term inflows. However, increase in operating expenses acted as a headwind.

Net income (on a GAAP basis) was $1.22 billion, up 29% from the prior-year quarter.

Revenue Growth Offsets Rise in Expenses

Revenues (on a GAAP basis) were $3.58 billion, increasing 2% year over year. The rise was driven by an increase in investment advisory, administration fees and securities lending revenues, and technology services revenues. However, the reported figure lagged the Zacks Consensus Estimate of $3.67 billion.

Total expenses amounted to $2.18 billion, up 3% year over year. The increase was due to rise in employee compensation and benefits costs, direct fund expenses, and general and administration costs.

Non-operating income (on a GAAP basis) was $33 million, up from non-operating income of $10 million recorded in the year-ago quarter.

BlackRock's adjusted operating income was $1.40 billion, up 1% year over year.

Strong AUM & Inflows

As of Sep 30, 2018, AUM totaled $6.44 trillion, reflecting an increase of 8% year over year. Further, during the reported quarter, the company witnessed long-term net inflows of $10.61 billion.

Share Repurchase

During the quarter under review, BlackRock repurchased shares worth $500 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -5.5% due to these changes.

VGM Scores

At this time, BlackRock has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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

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