BlackRock, Inc. BLK reported third-quarter 2015 adjusted earnings of $5.00 per share, outpacing the Zacks Consensus Estimate of $4.51 per share for the 8th consecutive quarter. However, the bottom line came in 4% lower than the year-ago quarter tally.
Better-than-expected results were attributable to a rise in revenues and a stable expense base. However, growth in assets under management (“AUM”) remained muted during the quarter.
After considering certain non-recurring items, net income for BlackRock totaled $843 million or $5.00 per share, down from $917 million or $5.37 per share in the prior-year quarter.
Quarter in Detail
Revenue increased 2% year over year to $2.91 billion. Moreover, the reported figure outpaced the Zacks Consensus Estimate of $2.81 billion.
Total expenses amounted to $1.69 billion, almost stable on a year-over-year basis. Rise in employee compensation and benefits expenses as well as distribution and servicing costs were largely offset by a fall in general and administration expenses as well as amortization of intangible assets costs.
Non-operating expense (on a GAAP basis) came in at $48 million, down 8% year over year.
BlackRock’s adjusted operating income came in at $1.23 billion, up 1% from the year-ago quarter.
As of Sep 30, 2015, AUM totaled $4.51 trillion, remaining flat year over year. Further, the company witnessed total long-term net inflows of $35 billion.
Share Repurchases
BlackRock bought back shares worth about $275 million in the reported quarter.
Our Viewpoint
While BlackRock continues to capitalize on opportunistic acquisitions to boost performance, its initiatives to enhance market share in the ETF business are expected to aid revenue growth going forward. Also, the company’s enhanced capital deployment activities remain impressive.
Nonetheless, weak expense control, high dependence on fee-based revenues and regulatory restrictions on its revenue sources make us apprehensive.
Currently, BlackRock carries a Zacks Rank #5 (Strong Sell).
Among other investment managers, Ameriprise Financial, Inc. AMP, Waddell & Reed Financial, Inc. WDR and Invesco Ltd. IVZ are scheduled to release their third-quarter earnings results on Oct 21, Oct 27 and Oct 29, respectively.
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