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Growth in AUM Likely to Support BlackRock's (BLK) Q2 Earnings
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BlackRock, Inc. (BLK - Free Report) is slated to report second-quarter 2023 results on Jul 14 before the opening bell. While its revenues are expected to have declined in the quarter, earnings are likely to have witnessed year-over-year growth.
In first-quarter 2023, BLK’s earnings surpassed the Zacks Consensus Estimate. Results benefited from a decline in expenses. However, lower revenues and assets under management (AUM) balance were the major headwinds.
BlackRock has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, delivering a surprise of 7.8%, on average.
The company’s business activities and prospects in the to-be-reported quarter have not encouraged analysts to revise earnings estimates upward. The Zacks Consensus Estimate for BlackRock’s second-quarter earnings of $8.43 has been revised 1.1% lower over the past 30 days. Nevertheless, the figure indicates a rise of 14.5% from the year-ago quarter’s reported number. Our estimate for second-quarter earnings is $8.05.
The consensus estimate for sales is pegged at $4.47 billion, which suggests a decline of 1.1% from the prior-year quarter’s reported number. Our estimate for sales is $4.43 billion.
Before we take a look at what our quantitative model predicts for the to-be-reported quarter, let’s discuss the factors that are likely to have impacted the company’s quarterly performance.
Key Factors & Estimates for Q2
BlackRock has been a dominant player in the exchange traded fund (“ETF”) market, given its continued investments in the U.S. iShare core ETFs. As investors have kept increasing allocations toward ETFs instead of alternative investments to reduce management costs, the company’s iShares inflows have been strong over the past several quarters, with the trend expected to have continued in the to-be-reported quarter.
The overall market performance was decent in the quarter. Thus, driven by expected inflows, BLK’s AUM balance is likely to have increased. The Zacks Consensus Estimate for total AUM is pegged at $9.12 trillion, suggesting a year-over-year rise of 7.5%. Our estimate for total AUM for the second quarter is $8.69 trillion, indicating a rise of 2.4%.
Because of the rise in AUM, the related fee is expected to have been positively impacted. The Zacks Consensus Estimate for the company’s investment advisory performance fees is pegged at $125.9 million, indicating an increase of 18.8% from the previous-year quarter’s reported number. Our estimate for performance fees is $119.6 million, suggesting a rise of 12.8%.
However, the Zacks Consensus Estimate for investment advisory, administration fees and securities-lending revenues for the to-be-reported quarter is pegged at $3.64 billion, indicating a 1.4% year-over-year decline. Our estimate for the same is $3.59 billion, implying a decline of 2.6%.
The consensus estimate for distribution fees of $335.3 million indicates a decline of 7.1% from the previous year. We also project the metric to be $335.3 million.
The consensus estimate for technology services revenues is pegged at $354.5 million, implying a 6.8% year-over-year rise. We project the metric to increase 4.5% to $346.9 million.
BlackRock’s expenses have been elevated over the past few years. Given that the company has been continuing its restructuring initiatives to modify the size and shape of its workforce and improve operating efficiency, overall costs are expected to have increased in the second quarter. Our estimate for total expenses is $3 billion, implying a year-over-year rise of 5%.
Key Development During the Quarter
In June, BLK signed an agreement to acquire London-based Kreos Capital, a private debt provider. While the financial terms of the deal were not disclosed, the transaction is expected to close in the third quarter of 2023.
The deal will have no material impact on BlackRock's earnings.
Kreos Capital is a well-known debt provider that invests in technology and health sectors across Israel and European high-growth companies.
The acquisition is expected to further bolster BlackRock's position as the global credit asset manager. It is also expected to further expedite BLK's goal to provide its clients with a wide range of private market investment products and services.
Earnings Whispers
According to our quantitative model, the chances of BlackRock beating the Zacks Consensus Estimate for earnings this time are low. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — which is required to be confident of an earnings surprise call.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for BlackRock is -0.06%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Stocks Worth a Look
A couple of finance stocks, which you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model, are Wells Fargo (WFC - Free Report) and PNC Financial (PNC - Free Report) .
PNC Financial is scheduled to release second-quarter 2023 earnings on Jul 18. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +1.41%.
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Growth in AUM Likely to Support BlackRock's (BLK) Q2 Earnings
BlackRock, Inc. (BLK - Free Report) is slated to report second-quarter 2023 results on Jul 14 before the opening bell. While its revenues are expected to have declined in the quarter, earnings are likely to have witnessed year-over-year growth.
In first-quarter 2023, BLK’s earnings surpassed the Zacks Consensus Estimate. Results benefited from a decline in expenses. However, lower revenues and assets under management (AUM) balance were the major headwinds.
BlackRock has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, delivering a surprise of 7.8%, on average.
BlackRock, Inc. Price and EPS Surprise
BlackRock, Inc. price-eps-surprise | BlackRock, Inc. Quote
The company’s business activities and prospects in the to-be-reported quarter have not encouraged analysts to revise earnings estimates upward. The Zacks Consensus Estimate for BlackRock’s second-quarter earnings of $8.43 has been revised 1.1% lower over the past 30 days. Nevertheless, the figure indicates a rise of 14.5% from the year-ago quarter’s reported number. Our estimate for second-quarter earnings is $8.05.
The consensus estimate for sales is pegged at $4.47 billion, which suggests a decline of 1.1% from the prior-year quarter’s reported number. Our estimate for sales is $4.43 billion.
Before we take a look at what our quantitative model predicts for the to-be-reported quarter, let’s discuss the factors that are likely to have impacted the company’s quarterly performance.
Key Factors & Estimates for Q2
BlackRock has been a dominant player in the exchange traded fund (“ETF”) market, given its continued investments in the U.S. iShare core ETFs. As investors have kept increasing allocations toward ETFs instead of alternative investments to reduce management costs, the company’s iShares inflows have been strong over the past several quarters, with the trend expected to have continued in the to-be-reported quarter.
The overall market performance was decent in the quarter. Thus, driven by expected inflows, BLK’s AUM balance is likely to have increased. The Zacks Consensus Estimate for total AUM is pegged at $9.12 trillion, suggesting a year-over-year rise of 7.5%. Our estimate for total AUM for the second quarter is $8.69 trillion, indicating a rise of 2.4%.
Because of the rise in AUM, the related fee is expected to have been positively impacted. The Zacks Consensus Estimate for the company’s investment advisory performance fees is pegged at $125.9 million, indicating an increase of 18.8% from the previous-year quarter’s reported number. Our estimate for performance fees is $119.6 million, suggesting a rise of 12.8%.
However, the Zacks Consensus Estimate for investment advisory, administration fees and securities-lending revenues for the to-be-reported quarter is pegged at $3.64 billion, indicating a 1.4% year-over-year decline. Our estimate for the same is $3.59 billion, implying a decline of 2.6%.
The consensus estimate for distribution fees of $335.3 million indicates a decline of 7.1% from the previous year. We also project the metric to be $335.3 million.
The consensus estimate for technology services revenues is pegged at $354.5 million, implying a 6.8% year-over-year rise. We project the metric to increase 4.5% to $346.9 million.
BlackRock’s expenses have been elevated over the past few years. Given that the company has been continuing its restructuring initiatives to modify the size and shape of its workforce and improve operating efficiency, overall costs are expected to have increased in the second quarter. Our estimate for total expenses is $3 billion, implying a year-over-year rise of 5%.
Key Development During the Quarter
In June, BLK signed an agreement to acquire London-based Kreos Capital, a private debt provider. While the financial terms of the deal were not disclosed, the transaction is expected to close in the third quarter of 2023.
The deal will have no material impact on BlackRock's earnings.
Kreos Capital is a well-known debt provider that invests in technology and health sectors across Israel and European high-growth companies.
The acquisition is expected to further bolster BlackRock's position as the global credit asset manager. It is also expected to further expedite BLK's goal to provide its clients with a wide range of private market investment products and services.
Earnings Whispers
According to our quantitative model, the chances of BlackRock beating the Zacks Consensus Estimate for earnings this time are low. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — which is required to be confident of an earnings surprise call.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for BlackRock is -0.06%.
Zacks Rank: The company currently carries a Zacks Rank #3.
Stocks Worth a Look
A couple of finance stocks, which you may want to consider, as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model, are Wells Fargo (WFC - Free Report) and PNC Financial (PNC - Free Report) .
The Earnings ESP for Wells Fargo is +0.16% and it carries a Zacks Rank #3 at present. The company is slated to report second-quarter 2023 results on Jul 14. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PNC Financial is scheduled to release second-quarter 2023 earnings on Jul 18. The company, which carries a Zacks Rank #3 at present, has an Earnings ESP of +1.41%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.