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BlackRock Earnings: GIP Acquisition Provides a Boost to Improving AUM Growth Forecast

We expect to raise our fair value estimate of BlackRock stock.

A photo of BlackRock's office building.

Key Morningstar Metrics for BlackRock

What We Thought of BlackRock’s Earnings

There was little in BlackRock’s BLK fourth-quarter earnings that would alter our long-term view of the firm. Even so, we expect to increase our $710 per share fair value estimate by at least 10% to account for not only a higher level of assets under management, or AUM, but also the firm’s announced acquisition of $100 billion alternative asset manager Global Infrastructure Partners. Even with that expected revision, we view the shares as fairly valued.

BlackRock closed out December 2023 with $10.008 trillion in managed assets, up 10.0% sequentially and 16.5% year over year. This was well above our forecast for $9.075 trillion in AUM, which did not include the meaningful runup in the equity markets at the tail end of 2023. Net long-term inflows of $63 billion during the quarter were below our expectations for $85 billion in positive flows but still reflective of annualized organic AUM growth of 3%. This was at the lower end of our long-term annual organic AUM growth target of 3%-5% but below management’s 5% annual growth target.

While average AUM was up 11.5% year over year during the fourth quarter, BlackRock recorded a 6.1% increase in base fee revenue growth as product mix shift and changing fee rates led to a 4.9% decline in the firm’s realization rate. Total revenue was up 6.8% year over year, driven primarily by higher technology services revenue. Full-year top-line growth of -0.1% was in line with our forecast for 2023.

BlackRock posted a 60-basis-point year-over-year decline in full-year GAAP operating margins to 35.1% due to higher compensation and fund administration costs. On an adjusted basis, operating margins were down 110 basis points year over year to 41.7%. Adjusted earnings per share of $9.66 for the December quarter was better than our $8.63 per share forecast and the FactSet consensus estimate of $8.77 per share.

BlackRock Stock Price

Data as of Source: Morningstar Direct.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Greggory Warren

Strategist
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Greggory Warren, CFA, is a strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers the traditional U.S.-and Canadian-based asset managers, as well as Berkshire Hathaway.

Before assuming his current role in 2017, Warren covered the financial-services sector as a senior analyst since late 2008. Prior to that time, he covered non-alcoholic beverage manufacturers and distributors, packaged food firms, food service distributors, and tobacco companies. Before joining Morningstar in 2005, Warren worked as a buy-side equity analyst for more than seven years, covering consumer staples and consumer cyclicals.

Warren holds a bachelor's degree in accounting and English from Augustana College. He also holds the Chartered Financial Analyst® designation and is a member of the CFA Society of Chicago. During 2014-19, Warren was selected to participate on the analyst panel at Berkshire Hathaway’s annual meeting, asking questions directly of Warren Buffett and Charlie Munger. The analyst panel was disbanded ahead of Berkshire’s 2020 annual meeting. Warren also ranked second in the investment services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

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