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BlackRock (BLK) Q3 Earnings Top Estimates on Lower Costs

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BlackRock, Inc. (BLK - Free Report) reported third-quarter 2016 adjusted earnings of $5.14 per share, which handedly surpassed the Zacks Consensus Estimate of $5.05. Moreover, the bottom line came in 3% higher than the year-ago quarter.

Earnings were better-than-expected primarily due to a decline in total expenses. However, lower revenues acted as a headwind. Nonetheless, assets under management (AUM) experienced a year-over-year rise and the company witnessed strong inflows during the quarter.

Net income for BlackRock in the quarter was $875 million, up 4% from the prior-year quarter.

 

Revenues & Expenses Witness a Decline

Revenues dropped 3% year over year to $2.8 billion. The fall was due to a decline in all the components except investment advisory, administration fees and securities lending revenue, and BlackRock Solutions and advisory. Further, the reported figure missed the Zacks Consensus Estimate of $2.9 billion.

Total expenses amounted to $1.6 billion, down 3.6% year over year. There was a decline in all the expense components except distribution and servicing costs, and direct fund expense.

Non-operating income (on a GAAP basis) came in at $1 million, as against non-operating expense of $48 million in the year-ago period. BlackRock’s adjusted operating income came in at $1.2 billion, down 1% year over year.

Strong AUM & Inflows

As of Sep 30, 2016, AUM totaled $5.1 trillion, up 14% year over year. Further, during the reported quarter, the company witnessed long-term net inflows of $55 billion.

Share Repurchase

BlackRock bought back shares worth $275 million in the reported quarter.

Our Viewpoint

While BlackRock seems well poised to capitalize on opportunistic acquisitions to enhance performance, its initiatives to gain market share in the ETF business are expected to drive revenue growth. Further, the company’s diversified products and revenue mix will enable it to easily fulfill the changing needs of clients, thereby boosting growth.

However, high dependence on fee-based revenues and regulatory restrictions on its revenue sources are the primary concerns.

BLACKROCK INC Price and EPS Surprise

BLACKROCK INC Price and EPS Surprise | BLACKROCK INC Quote

Currently, BlackRock carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.

Among other investment managers, Ameriprise Financial, Inc. (AMP - Free Report) is expected to announce its third-quarter 2016 results on Oct 25, while The Blackstone Group L.P. (BX - Free Report) and Invesco Ltd. (IVZ - Free Report) are scheduled to post their numbers on Oct 27.

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