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BlackRock (BLK) Q1 Earnings Miss as AUM Declines, Costs Rise

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BlackRock, Inc.’s (BLK - Free Report) first-quarter 2020 adjusted earnings of $6.60 per share lagged the Zacks Consensus Estimate of $6.69. The figure was marginally lower than the year-ago quarter’s number.

Results were primarily hurt because of an increase in expenses. Moreover, long-term net outflows resulted in a decline in assets under management (AUM), which was a negative for the company. Nevertheless, higher revenues supported results to some extent.

Net income attributable to BlackRock (on a GAAP basis) was $806 million, down 23.5% from the prior-year quarter.

Revenues Improve, Expenses Rise

Revenues for the reported quarter (on a GAAP basis) were $3.71 billion, increasing 10.9% year over year. The upside stemmed from an increase in all components of revenues. Moreover, the reported figure surpassed the Zacks Consensus Estimate of $3.58 billion.

Total expenses amounted to $3.03 billion, up 43.2% year over year. The increase was due to a rise in all cost components.

Non-operating expense (on a GAAP basis) was $71 million against non-operating income of $125 million recorded in the year-ago quarter.

BlackRock’s adjusted operating income was $1.27 billion, up 3.2% year over year.

AUM Declines due to Net Outflows

As of Mar 31, 2020, AUM totaled $6.47 trillion, reflecting a decline of nearly 1% year over year. In the reported quarter, the company witnessed long-term net outflows of $18.66 billion.

Our Viewpoint

BlackRock’s acquisitions and expansion efforts along with initiatives to restructure its actively managed equity business are expected to boost the top line and AUM. However, an increase in operating expenses (as witnessed in the first quarter as well) might hurt the bottom line to an extent in the near term.

BlackRock, Inc. Price, Consensus and EPS Surprise
 

BlackRock, Inc. Price, Consensus and EPS Surprise

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

BlackRock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Schedule of Other Finance Companies

Community Bank System (CBU - Free Report) is scheduled to release quarterly results on Apr 20, while Atlantic Capital Bancshares will report earnings on Apr 23. FB Financial Corporation (FBK - Free Report) is scheduled to release results on Apr 27.

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