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Analyst Blog

On Feb 26, 2013, we reaffirmed our long-term recommendation on BlackRock, Inc. (BLK - Analyst Report) at Neutral. This reflects the company’s strong fourth-quarter results, which exceeded the Zacks Consensus Estimate by nearly 6%.

Why Neutral?

BlackRock’s fourth-quarter adjusted earnings came in at $3.96 per share, significantly surpassing the Zacks Consensus Estimate of $3.74. Better-than-expected results were primarily driven by augmented top line, partly offset by higher operating expenses. Moreover, increased asset under management (AUM) was a positive.

Following the fourth-quarter results, the Zacks Consensus Estimate for 2013 has gone up 3.3% to $15.47 per share. Likewise, the Zacks Consensus Estimate for 2014 has also advanced (up 5.3% to $17.63 per share). With the Zacks Consensus Estimates for both 2013 and 2014 increasing, the company now has a Zacks Rank #2 (Buy).

Moreover, BlackRock has been expanding primarily via acquisitions – domestic and overseas – leading to growth in AUM. The company has ample acquisition opportunities in the overseas markets like Europe, Middle East, Africa and the Asia Pacific.

Yet, elevated operating expenses remain a major concern for BlackRock. Though total operating expenses declined slightly on a year-over-year basis in 2012, increased regulatory compliance costs as well as higher marketing costs (related to the company’s new brand campaign) will keep the overall expenses high.

Other Investment Management Stocks Worth Considering

While we prefer BlackRock, other financial investment management stocks worth a look include AllianceBernstein Holding L.P. (AB - Snapshot Report), Lazard Ltd. (LAZ - Analyst Report) and Virtus Investment Partners, Inc. (VRTS - Snapshot Report). All these carry a Zacks Rank #1 (Strong Buy).

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