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Why is an Earnings Beat Less Likely for BlackRock (BLK) in Q1?

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BlackRock, Inc. BLK is slated to report first-quarter 2020 results on Apr 16, before the opening bell. Its revenues and earnings in the quarter are expected to have improved on a year-over-year basis.

In fourth-quarter 2019, the company’s earnings surpassed the Zacks Consensus Estimate. Results were driven by an improvement in revenues and growth in assets under management (AUM), partly offset by higher expenses.

Notably, BlackRock has an impressive earnings surprise history. Its earnings have surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with a positive surprise of 4.1%, on average.

BlackRock, Inc. Price and EPS Surprise
 

BlackRock, Inc. Price and EPS Surprise

BlackRock, Inc. price-eps-surprise | BlackRock, Inc. Quote


However, the company’s business activities and prospects in the first quarter did not encourage analysts to revise earnings estimates upward. The Zacks Consensus Estimate for its earnings of $6.72 for the to-be-reported quarter has moved 7.2% lower over the past 30 days. Nevertheless, the figure indicates a rise of 1.7% from the year-ago quarter’s reported figure.

The consensus estimate for sales is pegged at $3.63 billion, which suggests an increase of 8.4% from the prior-year quarter’s reported number.

Before we take a look at what our quantitative model predicts for the first quarter, let’s discuss the factors that are likely to have impacted results.

Key Factors to Note

BlackRock remains a dominant player in the ETF market, given its continued investments in the U.S. iShare core ETFs. Moreover, with investors increasing allocations toward ETFs instead of alternative investments to reduce management costs, the company’s iShares inflows have remained strong over the past several quarters.

However, due to the negative impacts of the coronavirus outbreak, the first quarter is expected to have witnessed modest outflows. Thus, the company’s AUM is not expected to have improved in the quarter.

Driven by an expected decline in AUM, the related fee is expected to have been negatively impacted.

BlackRock’s expenses have remained elevated over the past few years. As the company continues with 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 to-be-reported quarter as well.

Earnings Whispers

According to our quantitative model, chances of BlackRock beating the Zacks Consensus Estimate in the first quarter 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 -0.98%.

Zacks Rank: The company currently carries a Zacks Rank #3. While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings surprise call.

Stocks Worth a Look

Here are some finance stocks that 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.

BCB Bancorp, Inc. (NJ) BCBP is expected to release quarterly results soon. The company has an Earnings ESP of +4.17% and currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Earnings ESP for Carolina Financial Corporation CARO is +1.43% and it carries a Zacks Rank of 3 currently. The company is expected to report quarterly numbers in the coming days.

SB ONE BANCORP is likely to report quarterly earnings soon. The company, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +1.56%.

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