BlackRock, Inc. (BLK) is scheduled to report its third-quarter 2014 results on Wednesday, Oct 15, before the opening bell.
Last quarter, this investment management firm delivered 9.6% positive earnings surprise on the back of top-line growth driven by a rise in assets under management (AUM), partly offset by higher operating expenses. Moreover, the company recorded an earnings beat in the trailing four quarters, with an average surprise of 10.0%.
Will BlackRock impress in the upcoming release after combating the challenges witnessed by the industry? Let’s see what factors might have influenced the earnings report this time around.
Factors to Influence Q3 Results
The rising trend in operating expenses that is hurting the company is likely to continue. Expenses in the form of higher regulatory compliance and marketing costs are expected to keep expenses under pressure.
The rapidly growing asset management industry is undergoing intensified competition as well as innovation to survive. Investors are now very much price-sensitive, highly cynical and more sophisticated about costs. We believe that this may have some impact on the BlackRocks’s business.
However, the company has been able to sustain rising revenue growth over the past few years. This continued in the last quarter as well. We believe that diversified revenue and product mix will enable it keep this momentum going.
BlackRock’s activities during the quarter proved inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate declined to $4.71 from $4.73 per share over the last 7 days.
Earnings Whispers
Our proven model does not conclusively show that BlackRock is likely to beat the Zacks Consensus Estimate in the third quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: The Earnings ESP for BlackRock is -0.21%. This is because the Most Accurate estimate and the Zacks Consensus Estimate stand at $4.70 and $4.71 respectively.
Zacks Rank: BlackRock’s Zacks Rank #4 (Sell), decreases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise call.
Stocks That Warrant a Look
Here are some finance stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Capital One Financial Corp. (COF) has an Earnings ESP of +2.08% and carries a Zacks Rank #2. It is scheduled to report results on Oct 16.
Arlington Asset Investment Corp. (AI) has an Earnings ESP of +7.34% and carries a Zacks Rank #1. It is scheduled to report results on Oct 27.
CIT Group Inc. (CIT) has an Earnings ESP of +3.37% and a Zacks Rank #3. It is slated to report results on Oct 28.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment