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BlackRock Beats Earnings, Rev In Line

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BlackRock, Inc.’s (BLK - Free Report) second-quarter 2013 adjusted earnings came in at $4.15 per share, surpassing the Zacks Consensus Estimate of $3.82. This also compares favorably with $3.10 earned in the year-ago quarter.

Better-than-expected results were driven by increased top line, partly offset by higher operating expenses. Moreover, augmented assets under management (AUM) came as a positive.

After considering the PNC LTIP funding obligation and amount related to the Charitable Contribution, net income came in at $729 million or $4.19 per share, up from $554 million or $3.08 per share in the year-ago quarter.

Quarter in Detail

Total revenue was $2.48 billion, up 11% from the prior-year quarter. Further, total revenue came in line with the Zacks Consensus Estimate.

Total expenses came in at $1.63 billion, up 17% on a year-over-year basis. The increase was mainly due to a rise in employee compensation and benefits, direct fund expenses as well as general and administration expenses, partly offset by a fall in amortization of deferred sales commissions, and distribution and servicing costs.

Non-operating income, net of non-controlling interests, was recorded at $92 million, compared with non-operating expense of $46 million in the prior-year quarter.

BlackRock’s operating income, on a GAAP basis, was $849 million, increasing 2% from the year-ago quarter.

AUM totaled $3.86 trillion as of Jun 30, 2013, up 8% from the year-ago period. The company witnessed total long-term inflows of $11.9 trillion.

Share Repurchases

BlackRock repurchased about $250 million shares in the quarter under review.

Our Viewpoint

BlackRock’s sound capital deployment and acquisition activities are expected to benefit the company in the long run. Moreover, its initiatives to improve market share in ETF business is commendable.

However, increased cost structure and high dependence on fee-based revenues remain plausible concerns. Moreover, the persistent low interest-rate environment and stringent regulatory landscape are apprehended to adversely affect the company’s profitability and growth in the future.

BlackRock currently carries a Zacks Rank#3 (Hold).

Among other investment management firms, Ameriprise Financial, Inc. (AMP - Free Report) will announce results on Jul 24, Federated Investors, Inc. (FII - Free Report) on Jul 25, and Invesco Ltd. (IVZ - Free Report) on Jul 31.

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