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What to Expect of BlackRock Stock amid Lower Flows

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Updated

Reversing trend?

BlackRock (BLK), the world’s largest asset manager, witnessed lower inflows in ETFs and its Institutional segment in the first quarter. The trend reflected expectations of lower returns from equities in the upcoming quarters and outflows from debt due to rising rates. However, retail investors added funds, reflecting consumer confidence in the overall economy.

BlackRock is expected to post earnings per share of $6.64 in the second quarter, 1.0% lower sequentially and up 26.7% year-over-year. This growth is mainly due to higher inflows in 2017 across the asset classes and offerings as well as a rise in the valuations of its holdings. Its revenues are expected to rise 22.0% to $3.6 billion, reflecting inflows and appreciation of various asset classes.

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Recent performance

BlackRock (BLK) posted EPS of $6.70 in the first quarter compared to the estimate of $6.39. This increase was aided by investments in equities by retail and higher inflows into ETFs. Institutional investments saw a year-over-year fall in new flows, reflecting withdrawals from equities.

BlackRock was managing ~$6.3 trillion in assets on March 31 across ETFs, active fund offerings in hedge funds, private equities, equities, debt, and real estate. Asset managers (XLF) are expected to see lower inflows toward debt, followed by equities. However, commodities-backed offerings are gaining some traction due to oil (USO) and gold.

ETFs

BlackRock’s passive fund offerings have continually attracted funds over the past few years. However, this growth declined in the first quarter as investors are seeking active offerings for return generation in muted markets. State Street (STT), Vanguard, and JPMorgan Chase (JPM) have also seen decent growth in the exchange-traded fund sector. Blackstone (BX), an active fund manager, might see more inflows in the upcoming quarters due to aggressive offerings.

BlackRock’s top line grew 16.0% to $3.6 billion in the first quarter, and its operating income rose 20.0% to $1.4 billion, reflecting economies of scale and lower spending.

In this series, we’ll study BlackRock’s flow expectations, investments, fund performance, dividend, valuations, and long-term outlook.

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