Company / Analytics

Analytics, 16 January 2021

BlackRock earnings beat analyst estimates

BlackRock, the world’s largest asset manager reported a better-than-expected quarterly profit, as increased activity in financial markets resulted in higher fees and pushed its assets under management to record highs. Volatility in Q4 2020 saw investors piling into BlackRock’s exchange-traded funds, as well as active funds that aim to beat the market.

But while BlackRock has outperformed the market so far this year, the company must redirect billions of dollars worth of investments to comply with U.S. government sanctions against Chinese companies with military connections. What does the future hold for the company, and should you buy or sell the stock?

BlackRock is one of the world’s largest asset manager, with more than US$8.68 trillion assets under management. BlackRock manages the funds entrusted to it by its clients. It offers and manages various financial products, such as its iShares line of exchange-traded funds (ETFs) and mutual funds. Those assets can increase inorganically through price appreciation or favourableexchange-rate movements, or organically by attracting new clients or more money from existing clients.

BlackRock reported fourth-quarter 2020 adjusted EPS that beat analyst expectations, with more revenue than expected. Most of the metrics grew at a robust pace, compared to the year-ago quarter. The asset manager’s organic growth in assets under management for full-year 2020 was on par with analyst forecasts.

The company’s adjusted net income of $10.18 per share in the fourth quarter ended Dec. 31 topped Wall Street estimates of $9.14, according to Refinitiv data. The company’s total net inflows through the quarter were $126.93 billion, slightly lower than the $128.84 billion last year.

Increased volatility in the quarter — stemming from the U.S. presidential elections and the release of several Covid-19 vaccines — saw investors piling into BlackRock’s exchange-traded funds, as well as active funds that aim to beat the market. Assets under management grew to $8.68 trillion at the end of the quarter, from $7.43 trillion a year earlier.

How did the stock move?

BlackRock shares have added about 8.1% since the beginning of the year versus the S&P 500’s gain of 1.4%. Shares are currently trading at $744.29. Shares outpaced the broader market for most of the past year. The stock plunged with the rest of the market beginning in late February 2020 but rebounded from the lows reached in the second half of March at a much quicker, market-beating pace. BlackRock shares have provided a total return of 52.5% over the past 12 months, more than three times the S&P 500’s total return of 15.6%, supported by strong financial performance in recent quarters.

The company reported a 29.0% rise in adjusted EPS in Q3 FY 2020, its second-fastest rate of growth in at least 15 quarters. Revenue rose 18.3%, its fastest pace since Q4 FY 2017. In Q2 2020, adjusted EPS rose 22.3% compared to the year-ago quarter.

Stock’s outlook

A mix of accommodative monetary policy and optimism over increased stimulus measures have seen global equities scaling record highs since the end-2020, with investors betting on a steady economic recovery in 2021. While BlackRock has outperformed the market so far this year, the question that comes to investors’ minds is: what’s next for the stock?

BlackRock is facing major challenges these days just as the company is grappling with slowing growth. BlackRock must redirect billions of dollars worth of investments to comply with U.S. government sanctions against Chinese companies with military connections. As a result, BlackRock funds have to divest the blacklisted companies or risk losing U.S. investors who are no longer allowed to purchase shares of funds holding these companies, according to Investopedia. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead.

Should you buy or sell BlackRock shares?

The current consensus among 17 polled investment analysts is to buy stock in BlackRock Inc. This rating has held steady since January, when it was unchanged from a buy rating, according to CNN Business.

The 15 analysts offering 12-month price forecasts for BlackRock Inc have a median target of 840.00, with a high estimate of 890.00 and a low estimate of 715.00. The median estimate represents a +12.13% increase from the last price of 749.12, according to CNN Business.

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