BlackRock Inc.’s (BLK) third quarter 2011 adjusted earnings came in at $2.83 per share, fairly ahead of the Zacks Consensus Estimate of $2.74. The result also compares favorably with prior-year quarter earnings of $2.75 but came in below the prior-quarter earnings of $3.00.
Adjusted results for the quarter leave out U.K. lease exit costs, PNC LTIP funding obligation, Merrill Lynch compensation contribution and expense related to the deferred compensation plans.
GAAP net income came in at $595 million or $3.23 per share, as against $619 million or $3.21 per share in the prior quarter and $551 million or $2.83 per share in the year-ago quarter.
Better-than-expected results were primarily aided by an improved top line, which was offset partially by higher operating expenses.
Quarter in Detail
BlackRock’s total revenue in the quarter decreased 5% sequentially but increased 6% year over year to $2.23 billion. Total revenue missed the Zacks Consensus Estimate of $2.33 billion.
Total expenses decreased 2% sequentially but crept up 5% year over year to $1.45 billion. The year-over-year rise reflects an increase in direct fund expenses and higher general and administration expenses.
Non-operating expense, net of non-controlling interests, came in at $87 million compared with non-operating income of $45 million in the prior-year quarter. Non-operating expense included $37 million of net interest expense and $50 million of net negative marks primarily on distressed credit/mortgage and private equity fund co-investments. Net interest expense reflected the $2.0 billion debt issuance in second quarter 2011 in connection with the repurchase of Bank of America Corp.’s (BAC) remaining ownership interest in BlackRock.
BlackRock’s operating income on a GAAP basis stood at $777 million, down 10% from $866 million in the prior quarter but up 10% from $707 million in the year-earlier quarter.
Asset Under Management
Assets under management totaled $3.35 trillion as of September 30, 2011, down 9% sequentially and 3% year over year. The decrease was due to market-related declines across products.
Our Take
Results for the reported quarter reflect financial strength in the company. Though there are concerns related to the sluggish economic recovery, we expect BlackRock to continue benefiting from the growing need for risk management solutions within the financial industry.
BlackRock currently retains a Zacks #4 Rank, which translates into a short-term ‘Sell’ rating.
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