BlackRock, Inc. (NYSE: BLK) is slated to report fourth-quarter and 2021 results on Jan 14, before the opening bell. While its revenues for the quarter are expected to have witnessed year-over-year growth, earnings are likely to have declined.
In third-quarter 2021, BLK’s earnings surpassed the Zacks Consensus Estimate. Results benefited from an improvement in revenues, partly offset by higher expenses. Long-term net inflows resulted in a rise in assets under management (AUM) balance.
The company’s business activities and prospects in the to-be-reported quarter encouraged analysts to revise earnings estimates upward. The Zacks Consensus Estimate for BlackRock’s fourth-quarter earnings of $10.15 has been revised marginally upward over the past 30 days. However, the figure indicates a decline of 0.3% from the year-ago quarter’s reported number.
The consensus estimate for fourth-quarter sales is pegged at $5.15 billion, which suggests an increase of 14.9% from the prior-year quarter’s reported number.
Now, before we take a look at what the 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 Q4:
BlackRock has been a dominant player in the exchange-traded fund (ETF) market, given its continued investments in the U.S. iShare core ETFs. 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, the fourth quarter witnessed overall asset inflows, which is expected to have aided BlackRock’s AUM. Thus, driven by an expected increase in AUM, the related fee is expected to have increased.
The Zacks Consensus Estimate for the company’s investment advisory performance fees is pegged at $425 million, indicating a rise of 23.2% from the previous quarter’s reported number.
Likewise, the consensus estimate for distribution fees of $402 million indicates a marginal rise from the previous quarter’s reported figure.
However, the Zacks Consensus Estimate for total investment advisory, administration fees, and securities-lending revenues for the to-be-reported quarter is pegged at $3.93 billion, suggesting a marginal sequential decline.
BlackRock’s expenses have been elevated over the past few years. Given that the company continues 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 fourth quarter as well.
Notably, management projects fourth-quarter 2021 core general and administration expenses to increase sequentially, reflecting seasonal increases in marketing spend, additional costs related to return-to-office planning, and ongoing technology costs associated with cloud migrations.
According to the quantitative model, the 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) — which is required to be confident of an earnings surprise call.
BlackRock Long (Buy)
Enter at: 905.11