BLK With Nobias Technology: Case Study on BlackRock
BlackRock (BLK) posted its Q1 earnings last week. The company missed Wall Street’s consensus estimate on the top-line when it reported Q1 earnings last week; however, the company’s $4.7 billion revenue result still represented 6.8% year-over-year growth. BLK beat estimates on the bottom-line, posting non-GAAP earnings-per-share of $9.52, which came in $0.65/share ahead of the consensus analyst target.
During Q1, BLK’s EPS was up 20% on a diluted basis and 18% on an adjusted basis. At the end of Q1, BlackRock’s assets under management totaled $9.56 trillion. This was down from the $10.01 trillion that the company reported at the end of the fourth quarter. However, it was up on a year-over-year basis, compared to Q1 2021’s AUM total of $9.37 trillion. During Q1, BlackRock saw $86.3 billion of total net inflows. The company also highlighted $114 billion of “quarterly long-term net inflows”, which it said, “reflect[s] strength of broad-based platform with positive flows across all product types, investment styles and regions”.
With regard to BLK’s ~7% revenue growth, the company highlighted, “strong organic growth and 11% growth in technology services revenue, partially offset by lower performance fees”. During the Q1 earnings conference call, BlackRock’s CEO, Larry Fink, touched upon the ongoing strength that the company is seeing with its flagship iShares ETF brand, saying, “In the first quarter, we once again saw investors using ETFs to quickly allocate capital and the managed risk during periods of volatility. In the US, iShares’ secondary trading volumes were up nearly 40% compared to 2021 levels providing clients worldwide with the liquidity they needed in volatile markets.”
BLK April 2022
Fink noted that BLK’s ETF segment saw $56 billion in net inflows during the quarter, “with growth coming from each of our major product categories, including core strategic and precision ETFs.” During the conference call, BLK’s CFO, Gary Shedlin, highlighted the company’s strong operational results and then put a spotlight on shareholder returns saying, “Our capital management strategy remains, first, to invest in our business and then to return excess cash to shareholders through a combination of dividends and share repurchases.”
Shedlin continued, “We previously announced an 18% increase in our quarterly dividend to $4.88 per share of common stock and repurchased $500 million worth of common shares in the first quarter. At present, based on our capital spending plans for the year and subject to market conditions, including the relative valuation of our stock price, we still anticipate repurchasing at least $375 million of shares per quarter for the balance of the year consistent with our previous guidance in January.”
However, all of this talk of ongoing growth and strong shareholder returns wasn’t enough to buoy the stock. BlackRock shares fell 7.45% last week. This negative performance pushed the stock’s year-to-date performance down to -24.52%. However, even after this short-term weakness, the credible authors and analysts that the Nobias algorithm tracks continue to remain overwhelmingly bullish on BLK shares.
On March 31st, Nobias 4-star author, Cash Builders Opportunities, published an article at Seeking Alpha titled, “JPMorgan And BlackRock: 2 Financial Stocks Worth A Look”. The author touched upon BLK’s year-to-date weakness saying, “As the stock hit an all-time high and the overall uncertainty of the market in general, it makes sense that shares have fallen quite precipitously as of late. I believe that is opening up an excellent opportunity to pick up shares at a much lower price than where we were just a few months ago.”
Cash Builders Opportunities highlighted the company’s fundamental growth saying, “The higher earnings for BLK haven't only been asset appreciation. They have been receiving some massive inflows as well. For 2021, they noted that they had total net inflows of $540 billion. That helped translate into 20% higher revenue for the year and a 20% increase in diluted EPS. EPS from 2020 was $33.82, and in 2021, it came in at $39.18. Analysts are expecting for 2022 that BLK will see $41.40 in EPS.”
With regard to peace of mind during the current inflationary environment that we’re witnessing from a macro perspective at the moment, the author stated, “The growing dividends that beat out inflation are a huge selling point for a longer-term income investor.” With regard to BLK’s dividend growth history, they said, “They are going on 12 years of dividend growth. They did freeze their dividend for several quarters between 2008 and 2009. That resulted in a lack of annual increases, but they also didn't cut their dividend through that period.”
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
This bullish sentiment is consistent with the aggregate outlook expressed by the 4 and 5-star authors that we track. Of the recent articles focused on BLK shares that have been published by credible authors tracked by the Nobias algorithm, 95% have included a “Bullish” bias.
Nobias 5-star rated Wall Street analyst, James Fotheringtham of BMO Capital, lowered his price target for BLK shares after the company’s earnings report; however, his updated $734 price target still represents ~7% upside from the stock’s current $668.17 share price.
The BMO Capital report stated, “The analyst is cutting his FY22 EPS view by 99c to $40.21 after the company's "low quality" Q1 earnings beat, though he still sees BlackRock as "well positioned for growth" across a broad array of products and themes. Fotheringham adds that the company will continue to steal share from its traditional asset management peers, but its multiple has "limited upside".
Overall, the average price target being applied to BLK shares by the credible analysts (only those with 4 or 5-star Nobias ratings) right now is $918.40. This average price target represents upside potential of approximately 33.5% compared to the stock’s current price.
Disclosure: Nicholas Ward is long BLK. Nicholas Ward wrote this article for Nobias at their request with a view of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
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Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.