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BlackRock Q3 Earnings in Line

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BlackRock, Inc.’s (BLK - Free Report) third-quarter 2013 adjusted earnings came in at $3.88 per share, in line with the Zacks Consensus Estimate. Further, this was up 12% from $3.47 earned in the year-ago quarter.

Results on a year-over-year basis benefited from rise in revenues, partly offset by higher operating expenses. Further, significant growth in assets under management (AUM) was a tailwind.

After considering certain non-recurring items, net income attributable to BlackRock came in at $730 million or $4.21 per share, up from $642 million or $3.65 per share in the year-ago quarter.

Quarter in Detail

Total revenue was $2.47 billion, up 7% from the prior-year quarter. The increase was mainly attributable to improvement in markets, higher long-term net inflows and strength in BlackRock Solutions. However, total revenue lagged the Zacks Consensus Estimate of $2.49 billion.

Total expenses came in at $1.51 billion, up 4% on a year-over-year basis. The increase was mainly due to rise in employee compensation and benefits, direct fund expenses as well as general and administration expenses, partly offset by decrease in distribution and servicing costs.

Non-operating expense, net of non-controlling interests, was recorded at $17 million, compared with non-operating income of $43 million in the prior-year quarter.

BlackRock’s operating income, on a GAAP basis, was $966 million, increasing 10% from the year-ago quarter.

AUM totaled $4.10 trillion as of Sep 30, 2013, up 12% from the year-ago period. The company witnessed total long-term inflows of $25.3 trillion.

Share Repurchases

BlackRock repurchased about $250 million shares in the reported quarter.

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 the ETF business is commendable. However, increased costs and high dependence on fee-based revenues remain causes of concern.

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

Among other investment management firms, Ameriprise Financial, Inc. (AMP - Free Report) and Waddell & Reed Financial, Inc. (WDR - Free Report) are scheduled to announce results on Oct 29, while Invesco Ltd. (IVZ - Free Report) will do so on Oct 31.

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