BlackRock Beats Again

BlackRock Inc.’s ( BLK - Analyst Report ) fourth quarter 2011 adjusted earnings came in at $3.06 per share, ahead of the Zacks Consensus Estimate of $3.00. The results compare unfavorably with the prior-year quarter earnings of $3.42 but came in better than the prior-quarter earnings of $2.83.

GAAP net income came in at $555 million or $3.05 per share, as against $595 million or $3.23 per share in the prior quarter and $657 million or $3.35 per share in the year-ago quarter.

Better-than-expected results were primarily aided by lower operating expenses. However, weak revenue was the downside.

For the full year 2011, the company reported adjusted earnings of $11.85 per share, missing the Zacks Consensus Estimate by a nickel. However, this compares favorably with the earnings of $10.94 in the previous year.

Quarter in Detail

BlackRock’s total revenue in the quarter was almost flat sequentially but decreased 11% year over year to $2.23 billion. Total revenue also missed the Zacks Consensus Estimate of $2.26 billion.

Revenues for the full year were $9.08 billion, up 5% from $8.61 billion in the previous year. The Zacks Consensus Estimate for the full year was $9.12 billion.

Total expenses decreased 2% sequentially and 9% year over year to $1.42 billion. The year-over-year decrease primarily reflects lower employee compensation and benefits. General and administration expenses were also lower compared with the year-ago quarter.

Non-operating expense, net of non-controlling interests, came in at $21 million compared with non-operating income of $26 million in the prior-year quarter. Non-operating expense for the reported quarter included $39 million of net interest expense.

The increase in net interest expense reflected the $2.0 billion debt issuance in second quarter 2011 in connection with the repurchase of Bank of America Corp.’s ( BAC - Analyst Report ) remaining ownership interest in BlackRock.

BlackRock’s operating income on a GAAP basis stood at $808 million, up 4% from $777 million in the prior quarter but down 14% from $940 million in the year-earlier quarter.

Asset Under Management

Assets under management totaled $3.51 trillion as of December 31, 2011, up 5% sequentially but down 1% from the year-ago period. The sequential increase was due to strong inflows of $23.8 billion in long-term products and a $143.3 billion improvement in market and investment performance.

Our Take

Results for the reported quarter reflect financial strength in the company. Though there are concerns related to the sluggish economic recovery, we expect BlackRock to continue benefiting from the growing need for risk management solutions within the financial industry.

BlackRock currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.