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BlackRock, Inc.’s (BLK - Analyst Report) first-quarter 2013 adjusted earnings came in at $3.65 per share, surpassing the Zacks Consensus Estimate of $3.59. Though results compare favorably with the year-ago earnings of $3.16, it came below the prior-quarter earnings of $3.96.
Our proven model predicted an earnings beat by BlackRock as it had the right combination of two key ingredients – an earnings ESP (Read: Zacks Earnings ESP: A Better Method) of +0.84% and a Zacks Rank #2 (Buy).
The year-over-year improvement in results was primarily attributable to increased top line, partly offset by higher operating expenses. Moreover, augmented assets under management (AUM) came as a positive.
After considering PNC LTIP funding obligation, income tax changes and contribution to STIFs, net income came in at $632 million or $3.62 per share, down from $690 million or $3.93 per share in the prior quarter but up from $572 million or $3.14 per share in the year-ago quarter.
Quarter in Detail
BlackRock’s total revenue was $2.45 billion, down 3.5% from the prior quarter but up 8.9% from the prior-year quarter. Total revenue came in marginally ahead of the Zacks Consensus Estimate of $2.43 billion.
BlackRock’s total expenses came in at $1.54 billion, almost flat sequentially but up 7.4% on a year-over-year basis. The year-over-year increase was due to higher employee compensation and benefits, direct fund expenses as well as general and administration expenses, partly offset by lower amortization of deferred sales commissions and distribution and servicing costs.
BlackRock’s non-operating income, net of non-controlling interests, was recorded at $3 million compared with non-operating expense of $27 million in the prior quarter and non-operating income of $15 million in the prior-year quarter.
BlackRock’s net-interest expenses came in at $48 million, which was in line with the prior quarter but grew 20% from the prior-year quarter. BlackRock’s operating income, on a GAAP basis, stood at $909 million, falling 9.6% from the prior quarter but rising 11.5% from the year-ago quarter.
Assets Under Management
BlackRock’s AUM totaled $3.94 trillion as of Mar 31, 2013, up 3.8% sequentially and 6.8% from the year-ago period. The company witnessed total long-term inflows of $3.63 trillion, rising 4.2% from the last quarter.
BlackRock repurchased about $250 million shares in the quarter under review.
BlackRock’s sound capital deployment and acquisition activities are expected to benefit the company in the long run.
However, its cost structure and high dependence on fee-based revenues remain concerns. Moreover, the persistent low interest-rate environment and stringent regulatory landscape are apprehended to adversely affect its profitability and growth in the future.
BlackRock is not the only investment management firm that beat earnings this quarter. Here are some other firms you may want to consider as our model shows these have the right combination of elements to post an earnings beat this season
Principal Financial Group Inc. (PFG - Analyst Report) has an earnings ESP of +2.70% and carries a Zacks Rank #2 (Buy). It is scheduled to report its fiscal second-quarter results on Apr 26.
Franklin Resources Inc. (BEN - Analyst Report) has an earnings ESP of +1.62% and carries a Zacks Rank #2 (Buy). It is scheduled to report its fiscal second-quarter results on Apr 30.
Invesco Ltd. (IVZ - Analyst Report) has an earnings ESP of +2.13% and carries a Zacks Rank #2 (Buy). It is scheduled to report its first-quarter results on Apr 30.