BlackRock Earnings: Market Gains Offset Slightly Weaker Inflows as Firm Hits Record AUM

Key Morningstar Metrics for BlackRock

• Fair Value Estimate: $850.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

What We Thought of BlackRock’s Earnings

There was little in BlackRock’s BLK second-quarter earnings that would alter our long-term view of the firm. We expect to leave our fair value estimate of $850 per share in place. While the company continues to trade at a hefty premium relative to the other traditional asset managers (which we feel is warranted), its shares are trading at less than a 5% discount to our fair value estimate.

BlackRock closed out June 2024 with a record $10.646 trillion in assets under management, up 1.7% sequentially and 12.9% year over year. While this was slightly below our forecast for $10.704 billion, the company did see a large single-client-specific institutional outflow of $20 billion from its fixed-income platform as that client raised cash for an acquisition. This also impacted net long-term inflows, which at $52 billion during the quarter were lower than our expectations for $87 billion. Excluding the large institutional outflow, BlackRock’s annualized organic AUM growth rate was 3% during the June quarter, at the lower end of our annual target of 3%-5%.

While average long-term AUM was up 13.8% year over year during the quarter, BlackRock recorded a 7.3% increase in base fee revenue growth as product mix shift and changing fee rates led to a 5.7% year-over-year decline in its realization rate. Total revenue was up 7.7% for the quarter and 9.5% for the first half compared with the prior year’s periods. Our full-year forecast still calls for high-single-to-low-double-digit top-line growth, noting that the back half of each year tends to be stronger for the firm.

BlackRock posted a year-over-year increase in first-half GAAP operating margins of 150 basis points to 36.6%. On an adjusted basis, operating margins were 43.1% during the first half, compared with 41.5% during 2023.