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BlackRock Earnings: Market Gains Make Up for Weaker Inflows as Firm Hits Record AUM

We expect to slightly increase our fair value estimate of BlackRock stock.

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What We Thought of BlackRock’s Earnings

While there was little in BlackRock’s BLK first-quarter earnings to alter our long-term view of the firm, we expect to slightly increase our fair value estimate of $830 per share to account for revised near-term expectations for assets under management, revenue, and profitability. While the company’s shares trade at a hefty premium relative to other traditional asset managers (which we believe is warranted), they are trading at a nearly 10% discount to our fair value estimate.

BlackRock closed March 2024 with a record $10.473 trillion in AUM, up 4.6% sequentially and 15.2% year over year. Net long-term inflows of $76 billion during the quarter were lower than our expectations for $115 billion, with the firm hit by more low-fee institutional index redemptions and weaker active flows than we forecast. However, this reflected annualized organic AUM growth of 3.3%, at the lower end of our long-term annual target of 3.0%-5.0% but a slight improvement over the 3.0% seen during the fourth quarter of 2023.

While average AUM was up 14.3% year over year during the quarter, BlackRock recorded a 7.9% increase in base fee revenue growth as product mix shift and changing fee rates led to a 5.6% decline in its realization rate. Total revenue was up 11.4% compared with the prior-year quarter. Our full-year forecast continues to call for high-single-digit to double-digit top-line growth.

BlackRock posted a 190-basis-point year-over-year increase in first-quarter GAAP operating margins to 35.8% as expense growth came in lower than top-line growth. On an adjusted basis, operating margins were 42.2%, compared with 40.4% in the year-ago period. Adjusted EPS of $9.81 for the March quarter was better than our forecast of $9.61 and the FactSet consensus estimate of $9.38.

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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

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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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