by SignalFactory · October 12, 2020 | 09:37:39 UTC
BlackRock, Inc. BLK is slated to report third-quarter 2020 results on Oct 13, before the opening bell. Its revenues and earnings in the quarter are expected to have improved on a year-over-year basis.
In the second quarter of 2020, the company’s earnings surpassed the Zacks Consensus Estimate. Results benefited from an improvement in revenues and a marginal decline in expenses. Further, long-term net inflows resulted in a rise in assets under management (AUM) balance, which was a major positive.
BlackRock has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three and lagged in one of the trailing four quarters, with a surprise of 6%, on average.
The company’s business activities and prospects in the third quarter encouraged analysts to revise earnings estimates upward. The Zacks Consensus Estimate for earnings of $7.40 for the to-be-reported quarter has moved marginally upward over the past 30 days. Also, the figure indicates a rise of 3.5% from the year-ago quarter’s reported number.
The consensus estimate for sales is pegged at $3.89 billion, which suggests an increase of 5.4% from the prior-year quarter’s reported number.
Now, before we look at what our quantitative model predicts for the to-be-reported quarter, let us discuss the factors that are likely to have impacted the company’s performance.
Key Factors to Note:
BlackRock has been 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 been strong over the past several quarters.
Moreover, despite continued fears related to the negative impacts of the coronavirus outbreak, the third quarter witnessed decent asset inflows. Thus, supported by inflows, BlackRock’s AUM is expected to have improved in the quarter.
The Zacks Consensus Estimate for AUM for the third quarter is pegged at $7.80 trillion, indicating a rise of 12% from the year-ago quarter’s reported number.
Notably, driven by an expected increase in AUM, the related fee is also expected to have been positively impacted.
The consensus estimates for total investment advisory, administration fees, and securities lending revenues for the to-be-reported quarter is pegged at $3.22 billion, suggesting a year-over-year increase of 8.2%.
However, the consensus estimates for a distribution fee of $256 million indicates a decline of 5.2% from the prior-year quarter.
BlackRock’s expenses have been elevated over the past few years. As the company has been continuing 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.
According to the Zacks quantitative model, chances of BlackRock beating the Zacks Consensus Estimate this time are high. This is because it has 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.
Earnings ESP: The Earnings ESP for BlackRock is +3.65%.
Zacks Rank: The company currently carries a Zacks Rank #2 (Buy).
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