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Bull of the Day: BlackRock (BLK)

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Headquartered in New York, BlackRock (BLK - Free Report) is the world’s largest asset manager, with more than $6 trillion in AUM.

They have a comprehensive range of products and services across asset classes, geographies and investment strategies and in a variety of structures that include separate accounts, mutual funds, iShares (ETFs) and other pooled investment vehicles.

Excellent Q4 Results

The company reported excellent results for Q4 and FY 2017, beating on both the top and bottom lines. Adjusted earnings for the quarter came in at $6.24 per share, ahead of the Zacks Consensus Estimate of $6.08 and up 21% year-over-year.

Revenues (GAAP basis) came in at $3.47 billion, up 20% year over year and ahead of the Zacks Consensus Estimate of $3.35 billion.

 

BlackRock, Inc. Price and EPS Surprise

BlackRock, Inc. Price and EPS Surprise | BlackRock, Inc. Quote

Booming ETF Market Boosts Growth

The company has been a big beneficiary of rising investor preference for ETFs as well as soaring stock markets.

They bought iShares from Barclays in 2009 for $13.5 billion. iShares then had $300 billion of assets under management, which has now grown to $1.7 trillion.

For the year 2017, total net inflows were $367 billion, which means the company received about $1 billion of new cash every day.  More than two-thirds of the new money went into iShares ETFs.

“Our continued investment in the iShares franchise, including product innovation, investor education and digital distribution, is driving accelerated growth and increased market share. During the third quarter, we again achieved the #1 market share of ETF flows globally, in both the United States and Europe, and in both equity and fixed income,” said the CEO.

The ETF industry is very top heavy as top three providers—BlackRock, Vanguard and State Street SPDR—control about 70% of industry assets.  Due to massive amounts of assets, these big players are able to aggressively cut their fees and attract more money into their low-cost ETFs.

Returning Cash to Shareholders

BlackRock returned $2.8 billion to shareholders in 2017 and announced a 15% increase in quarterly cash dividend to $2.88 per share last week.

The Bottom Line

BlackRock is well positioned to benefit from the explosive growth in ETFs due to its leadership position. It’s a Zacks Rank #1 (Strong Buy) stock with Industry and Sector Ranks in the top 23% and top 6% respectively.

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