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Growth in AUM Likely to Support BlackRock's (BLK) Q3 Earnings
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BlackRock, Inc. (BLK - Free Report) is slated to report third-quarter 2023 results on Oct 13 before the opening bell. While its revenues are expected to have improved in the quarter, earnings are likely to have witnessed a year-over-year decline.
In second-quarter 2023, BLK’s earnings surpassed the Zacks Consensus Estimate. Results benefited from a decline in expenses and higher non-operating income. The assets under management (AUM) balance witnessed improvement. However, lower revenues acted as a headwind.
BlackRock has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering a surprise of 12.1%, 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 third-quarter earnings of $8.73 has been revised 1.6% lower over the past seven days. The figure indicates a decline of 8.6% from the year-ago quarter’s reported number. Our estimate for third-quarter earnings is pinned at $8.47.
The consensus estimate for sales is pegged at $4.67 billion, which suggests a rise of 8.4% from the prior-year quarter’s reported number. Our estimate for sales is pinned at $4.60 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 Q3
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.
Thus, driven by expected inflows, BLK’s AUM balance is likely to have increased. The Zacks Consensus Estimate for total AUM is pegged at $9.58 trillion, suggesting a year-over-year rise of 20.3%. Our estimate for total AUM for the third quarter is $9.44 trillion, indicating a rise of 18.6%.
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 $166 million, indicating a significant increase from the previous-year quarter’s reported number. Our estimate for performance fees is $127.8 million, suggesting a rise of 55.8%.
The Zacks Consensus Estimate for investment advisory, administration fees and securities-lending revenues for the to-be-reported quarter is pegged at $3.76 billion, indicating a 6.4% year-over-year rise. Our estimate for the same is $3.73 billion, implying a rise of 5.5%.
The consensus estimate for distribution fee of $338 million indicates a rise of 4% from the previous year. We also project the metric to be $338 million.
The consensus estimate for technology services revenues is pegged at $369 million, implying a 9.2% year-over-year rise. We also project the metric to increase to $369 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 third quarter. Our estimate for total expenses is pinned at $3.06 billion, implying a year-over-year rise of 9.8%.
Key Developments During the Quarter
In August, BlackRock completed its previously announced agreement to acquire London-based Kreos Capital, which is a leading provider of growth and venture debt financing to companies in the technology and healthcare industries.
While the transaction (announced in June) had no material impact on BlackRock's earnings, the acquisition adds to BlackRock's position as the global credit asset manager.
Per an announcement in July, BLK is set to revolutionize India’s asset management industry through a joint venture with Jio Financial Services Limited (“JFS”) named Jio BlackRock. The 50:50 partnership brings together the scale and investment expertise of BLK with the local market knowledge and digital infrastructure capabilities of India-based JFS.
The primary goal of the joint venture is to democratize access to investment solutions and provide affordable, tech-enabled options for millions of investors in India. The convergence of rising affluence, favorable demographics and digital transformation in India has created an incredible opportunity. Jio BlackRock aims to capitalize on this potential and reshape the investment landscape in the country.
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 -5.40%.
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 also scheduled to release third-quarter 2023 earnings on Oct 13. The company has a Zacks Rank #3 and an Earnings ESP of +1.60% at present.
Image: Bigstock
Growth in AUM Likely to Support BlackRock's (BLK) Q3 Earnings
BlackRock, Inc. (BLK - Free Report) is slated to report third-quarter 2023 results on Oct 13 before the opening bell. While its revenues are expected to have improved in the quarter, earnings are likely to have witnessed a year-over-year decline.
In second-quarter 2023, BLK’s earnings surpassed the Zacks Consensus Estimate. Results benefited from a decline in expenses and higher non-operating income. The assets under management (AUM) balance witnessed improvement. However, lower revenues acted as a headwind.
BlackRock has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, delivering a surprise of 12.1%, 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 third-quarter earnings of $8.73 has been revised 1.6% lower over the past seven days. The figure indicates a decline of 8.6% from the year-ago quarter’s reported number. Our estimate for third-quarter earnings is pinned at $8.47.
The consensus estimate for sales is pegged at $4.67 billion, which suggests a rise of 8.4% from the prior-year quarter’s reported number. Our estimate for sales is pinned at $4.60 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 Q3
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.
Thus, driven by expected inflows, BLK’s AUM balance is likely to have increased. The Zacks Consensus Estimate for total AUM is pegged at $9.58 trillion, suggesting a year-over-year rise of 20.3%. Our estimate for total AUM for the third quarter is $9.44 trillion, indicating a rise of 18.6%.
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 $166 million, indicating a significant increase from the previous-year quarter’s reported number. Our estimate for performance fees is $127.8 million, suggesting a rise of 55.8%.
The Zacks Consensus Estimate for investment advisory, administration fees and securities-lending revenues for the to-be-reported quarter is pegged at $3.76 billion, indicating a 6.4% year-over-year rise. Our estimate for the same is $3.73 billion, implying a rise of 5.5%.
The consensus estimate for distribution fee of $338 million indicates a rise of 4% from the previous year. We also project the metric to be $338 million.
The consensus estimate for technology services revenues is pegged at $369 million, implying a 9.2% year-over-year rise. We also project the metric to increase to $369 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 third quarter. Our estimate for total expenses is pinned at $3.06 billion, implying a year-over-year rise of 9.8%.
Key Developments During the Quarter
In August, BlackRock completed its previously announced agreement to acquire London-based Kreos Capital, which is a leading provider of growth and venture debt financing to companies in the technology and healthcare industries.
While the transaction (announced in June) had no material impact on BlackRock's earnings, the acquisition adds to BlackRock's position as the global credit asset manager.
Per an announcement in July, BLK is set to revolutionize India’s asset management industry through a joint venture with Jio Financial Services Limited (“JFS”) named Jio BlackRock. The 50:50 partnership brings together the scale and investment expertise of BLK with the local market knowledge and digital infrastructure capabilities of India-based JFS.
The primary goal of the joint venture is to democratize access to investment solutions and provide affordable, tech-enabled options for millions of investors in India. The convergence of rising affluence, favorable demographics and digital transformation in India has created an incredible opportunity. Jio BlackRock aims to capitalize on this potential and reshape the investment landscape in the country.
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 -5.40%.
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 +3.83% and it carries a Zacks Rank #3 at present. The company is slated to report third-quarter 2023 results on Oct 13. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PNC Financial is also scheduled to release third-quarter 2023 earnings on Oct 13. The company has a Zacks Rank #3 and an Earnings ESP of +1.60% at present.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.