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Category: Stock Market and BlackRock
Date: 11 October 2019 Stock Price: $420.38 We take a look at the 2nd quarter earnings report of their 2019 fiscal year of BlackRock the fiduciary firm that has approximately $6.84 trillion in assets under management on behalf of clients across the world.
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About BlackRock
BlackRock helps investors build better financial futures. As a fiduciary to investors and a leading provider of financial technology, our clients turn to us for the solutions they need when planning for their most important goals. As of June 30, 2019, the firm managed approximately $6.84 trillion in assets on behalf of investors worldwide
Overview of BlackRock's latest earnings report
Data below is reported for the latest quarter unless stated otherwise
- Revenue: $3.524 billion (down from $3.605 billion for the same quarter of the previous year)
- Revenue decreased by -2.24% over the last 12 months
- Total expenses: $2.246 billion (up from $2.165 billion for the same quarter of the previous year)
- Total expenses decreased by 3.74% over the last 12 months
- Net income: $1.031 billion (down from $1.078 billion for the same quarter of the previous year)
- Diluted earnings per share: $6.41 (down from $6.62 for the same quarter of the previous year)
- PE ratio: 16.42
- Dividend declared for quarter: $3.30 (up from $2.88 for the same quarter of the previous year)
- Dividend yield: 3.14%
- Dividend yield: 3.14%
- Diluted weighted-average shares outstanding: 156.366 million (down from 160.779 million for the same quarter of the previous year)
- Assets under management by BlackRock: $6.842 trillion (up from $6.299 trillion for the same quarter of the previous year)
BlackRock's management commentary on the results and outlook
New York, July 19, 2019 – BlackRock, Inc. (NYSE: BLK) today reported financial results for the three and six months ended June 30, 2019.
“BlackRock generated $151 billion of total net inflows in the second quarter, a record 9% annualized organic asset growth. While organic base fee growth of 3% and the year-over-year revenue decline reflected certain market headwinds, our second quarter results validate BlackRock’s unique ability to bring together the entire firm to meet clients’ needs in any market environment. We are now working with clients in more ways than ever before and developing deeper relationships with them as a result. “
iShares AUM grew to $2 trillion at quarter end, doubling in just five years, with 80% of that growth coming organically. iShares net inflows of $36 billion were once again paced by our industry-leading fixed income ETF franchise. Active net inflows of $75 billion were also led by fixed income, reflecting two significant strategic institutional wins, and included the successful close of BlackRock Science and Technology Trust II, a $1.4 billion active equity fund that was the industry’s largest closed-end fund raise in the last five years.
Cash management strategies saw strong net inflows, driven by client de-risking and a number of significant wins. “Technology services revenue grew 20% year-over-year as we continued to invest in our leading technology capabilities. We closed our acquisition of eFront during the quarter further reinforcing Aladdin’s value proposition as the world’s most comprehensive whole-portfolio technology solution. “BlackRock continues to be disciplined in the way we invest in and evolve our platform. By approaching client needs comprehensively, bringing together the entirety of our global investment and technology platform, I am more confident than ever that we will continue to deliver exceptional long-term value for both clients and shareholders.”
- $151 billion of quarterly total net inflows, or 9% organic asset growth, driven by record fixed income and cash activity
- 2% decrease in revenue year-over-year reflects lower base fees, driven in part by lower securities lending revenue, and lower performance fees
- 20% growth in technology services revenue year-over year reflects momentum in Aladdin® and the impact of the eFront acquisition, which closed in May 2019
- 11% decrease in operating income year-over-year also reflects $61 million of fund launch costs
- 3% decrease in diluted EPS (4% as adjusted) year-over year reflects lower operating income and a higher effective tax rate in the current quarter, partially offset by higher non operating income and a lower diluted share count
“BlackRock generated $151 billion of total net inflows in the second quarter, a record 9% annualized organic asset growth. While organic base fee growth of 3% and the year-over-year revenue decline reflected certain market headwinds, our second quarter results validate BlackRock’s unique ability to bring together the entire firm to meet clients’ needs in any market environment. We are now working with clients in more ways than ever before and developing deeper relationships with them as a result. “
iShares AUM grew to $2 trillion at quarter end, doubling in just five years, with 80% of that growth coming organically. iShares net inflows of $36 billion were once again paced by our industry-leading fixed income ETF franchise. Active net inflows of $75 billion were also led by fixed income, reflecting two significant strategic institutional wins, and included the successful close of BlackRock Science and Technology Trust II, a $1.4 billion active equity fund that was the industry’s largest closed-end fund raise in the last five years.
Cash management strategies saw strong net inflows, driven by client de-risking and a number of significant wins. “Technology services revenue grew 20% year-over-year as we continued to invest in our leading technology capabilities. We closed our acquisition of eFront during the quarter further reinforcing Aladdin’s value proposition as the world’s most comprehensive whole-portfolio technology solution. “BlackRock continues to be disciplined in the way we invest in and evolve our platform. By approaching client needs comprehensively, bringing together the entirety of our global investment and technology platform, I am more confident than ever that we will continue to deliver exceptional long-term value for both clients and shareholders.”
BlackRock (NYSE: BLK) stock price history
The image below, obtained from Google, shows the stock price history of BlackRock over the last 5 years. And it's been a very good time for BlackRock stockholders. 5 years ago it was trading at $315.70 and its currently trading at around $420.38 a stock. That's a return of 33.15% provided to BlackRock stockholders over the last 5 years. While the returns aren't bad the opportunity cost of holding BlackRock stock that made just 33.15% over the last 5 years compared to holding Netflix for example that made over 300% becomes very significant. The stock of BlackRock is trading at close to the midpoint between its 52 week high and its 52 week low, which to us is indication that sentiment and momentum of BlackRock's stock is neutral at this point in time and one can expect it to continue trading sideways until there is a new catalyst driving the stock price either higher or lower.
Recent coverage of BlackRock
The extract below discusses the latest regarding BlackRock as obtained from TheStreet.com
BlackRock (BLK - Get Report) has held talks over the past year with Chinese internet giant Tencent Holdings (TCEHY) , as the world's largest money manager explores ways to strengthen its foothold in China, The Wall Street Journal reported.Citing people familiar with the matter, the Journal said the preliminary discussions have been focused on how to make BlackRock's tools and models for building investment portfolios more readily available in China.The New York-based asset manager, which has some $6.8 trillion in global assets under management, has had a presence in China for more than a decade, and its top leadership has earmarked China as a priority, the Journal said.
Read the full article here
BlackRock (BLK - Get Report) has held talks over the past year with Chinese internet giant Tencent Holdings (TCEHY) , as the world's largest money manager explores ways to strengthen its foothold in China, The Wall Street Journal reported.Citing people familiar with the matter, the Journal said the preliminary discussions have been focused on how to make BlackRock's tools and models for building investment portfolios more readily available in China.The New York-based asset manager, which has some $6.8 trillion in global assets under management, has had a presence in China for more than a decade, and its top leadership has earmarked China as a priority, the Journal said.
Read the full article here
BlackRock (NYSE: BLK) latest stock valuation
So what is BlackRock stock worth based on the release of their latest earnings report? Based on BlackRock's latest earnings report provided our valuation model provides a target (full value) price at $409.60 a BlackRock stock. We therefore believe that the stock of BlackRock is overvalued.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $409.60. Therefore we see a good entry point into BlackRock's stock at $368.64 or below. We expect the stock of BlackRock to pull back from current levels in coming weeks and months to more realistic valuation levels closer to our target price for BlackRock, unless the earnings release on 15 October 2019 for BlackRock surprises to the upside and there is an increase in earnings that warrants an increase in our valuation model target (full value) price for BlackRock.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $409.60. Therefore we see a good entry point into BlackRock's stock at $368.64 or below. We expect the stock of BlackRock to pull back from current levels in coming weeks and months to more realistic valuation levels closer to our target price for BlackRock, unless the earnings release on 15 October 2019 for BlackRock surprises to the upside and there is an increase in earnings that warrants an increase in our valuation model target (full value) price for BlackRock.