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How Do BlackRock’s Net Income and AUM Look amid Uncertainty?

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BlackRock beats estimates

BlackRock (BLK), the world’s largest asset manager, reported its 2Q16 earnings on July 14, 2016. The company beat Wall Street analysts’ adjusted EPS (earnings per share) estimates of $4.77 with posted EPS of $4.78.

BlackRock reported net income of $797 million in 2Q16, a decline of 5% from $838 million in the corresponding quarter last year. Reported revenues were $2.8 billion, a decline of 3% compared to the prior year’s quarter. The company’s total assets under management rose to $4.9 trillion compared to $4.7 trillion in 2Q15.

The company benefited in assets-gathering as investors shifted towards passive investing for savings on expenses. The stock fell by 0.7% on the earnings announcement.

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Management comments

In a company press release on July 14, 2016, BlackRock chair and CEO Laurence D. Fink said, “Our clients are facing unprecedented challenges as they attempt to navigate the current investment environment. Political and macroeconomic uncertainty, historically low yields and elevated market volatility are leading clients to pause, as evidenced by more than $55 trillion in bank deposits in the US, China and Japan alone. BlackRock generated $2 billion of long-term net flows in the quarter and $126 billion of inflows over the last twelve months, despite the impact of market headwinds and a slowdown in client activity. Beta and mix shift favored fixed income and cash relative to equities, and impacted second quarter base fees year-over-year.”

BlackRock posted revenues of $11.4 billion in the last fiscal year. Let’s compare that to revenues for BlackRock’s peers:

  • JPMorgan Chase (JPM): $51 billion
  • Bank of New York Mellon (BK): $3.2 billion
  • State Street (STT): $2.7 billion

Together, these companies form 1.7% of the SPDR S&P 500 ETF (SPY).

BlackRock overview

BlackRock has become the world’s largest asset manager in just two decades. The company is managing $4.7 trillion in assets for governments, sovereign wealth funds, institutions, and retail clientele. It manages assets through various product offerings such as portfolio investing equities, fixed income, alternatives, and money market instruments across global markets and asset classes.

In this series, we’ll be looking at BlackRock’s fund flows, ETFs, pricing pressures, dividends, strategic initiatives, outlook, and valuations.

First, let’s see why BlackRock iShares continues to be a mainstay in the industry.

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