BlackRock Posts Earnings Beat, Assets Jump 13% to Record $10.6 Trillion. Stock Rises. – Barron's

“BlackRock is executing the broadest range of investment opportunities we’ve seen in years, including private markets, Aladdin and whole-portfolio solutions across both ETFs and active,” Chief Executive Larry Fink said in a statement Monday.

Fink said growth was driven by inflows into private markets, active retail fixed income and exchange-traded funds, “leading to our best start to the year on record.”

BlackRock reported revenue of $4.8 billion. Analysts were expecting revenue of $4.85 billion in the period.

Investors are closely watching how much money is flowing into BlackRock’s sprawling funds. Long-term net inflows were $51 billion, below the $88.8 billion that analysts had expected. Second-quarter net inflows were $82 billion, below the $114.6 billion that analysts had expected.

The New York-based company reported adjusted net income of $1.4 billion and adjusted earnings per share of $9.28 on revenue of $4.46 billion for the second quarter of 2023.

The company’s shares rose 1.2% in premarket trading. BlackRock shares are up 2% this year while the S&P 500 is up 18% and trading at an all-time high.

This is breaking news: Read our preview of BlackRock’s earnings below and check back soon for further analysis.

Analysts predict BlackRock
,

Already the world’s largest asset manager, the company plans to get even bigger.

Wall Street expects New York-based BlackRock to see assets under management hit another record high on rising markets and robust inflows when it reports second-quarter results on Monday. As of March, BlackRock had a record $10.47 trillion in assets under management.

City

Analyst Christopher Allen wrote in a July 3 report that flows into BlackRock’s best-known low-fee exchange-traded funds — both stocks and bonds — were “healthy” in the second quarter. Allen, who has a buy rating on the stock, said he expects flows into actively managed funds to be “mixed.”

Below are analysts surveyed by FactSet’s forecasts for the most closely watched metrics, compared to BlackRock’s reported second-quarter 2023 results.

• Adjusted Net Income The forecast is $1.47 billion, compared with $1.4 billion last year.
• Adjusted earnings per share The forecast is for earnings of $9.96 per share, up from $9.28 per share a year ago.
• Revenue The forecast is $4.85 billion, compared with $4.46 billion last year.
• Assets under management The forecast is $10.67 trillion, compared with $9.43 trillion last year.
• Long-term net fund flows The forecast is $88.8 billion, up from $57 billion last year.
• Overall Net Flow The forecast is $114.6 billion, compared with $80.16 billion last year.
• Basic charge The forecast is $3.89 billion, compared with $3.6 billion last year.

BlackRock’s stock price typically does well when the stock market rises. But shareholders haven’t been rewarding the company lately. The stock is up 3.5% this year, but

S&P 500

The stock has risen 18% to an all-time high.BlackRock shares are down 15% from their highs reached in late 2021.

The poor performance was due to BlackRock’s failure to meet expectations of achieving its own long-term target of 5% organic base fee growth. “This growth rate and the path back to 5% remain the biggest debates among investors,” wrote Alex Blostein, an analyst at Goldman Sachs who has a buy rating on BlackRock, after the company released its first-quarter earnings in April.

Investors and the firm focus on base fees because they are a gauge of the firm’s momentum and ability to grow its core business of managing client assets. They represent the money management fees BlackRock charges excluding management fees (excluding performance fees) and account for the majority of its total revenue.

JPMorgan analyst Ken Worthington, who has a neutral rating on BlackRock shares, wrote to clients on July 9 that he raised his overall assets under management forecast by 2% as market conditions improved at the end of the second quarter. But most of that increase was driven by the stock market, and fixed-income returns were “flat,” he said.

In recent years, BlackRock and its traditional asset-management rivals have prioritized diversification away from their core portfolio of low-fee funds that track public markets amid declining fee revenues.

That means moving into more lucrative areas like private markets and software sales. BlackRock Inc. said on June 30 it was buying Preqin Inc., a data provider that will dominate the market selling analytics in opaque private markets and work with its vast Aladdin platform, for $3.2 billion.

BlackRock, led by co-founder and CEO Larry Fink, also announced earlier this year that it would acquire private infrastructure investment firm Global Infrastructure Partners.

Investors will be listening for more details about BlackRock’s private markets expansion when the company reports earnings on Monday morning. Morgan Stanley analyst Michael Cypris, who has an overweight rating on BlackRock shares, said he’ll be listening for commentary on the company’s private markets buildout as well as opportunities for fixed income and organic growth.

Email Rebecca Ungarino at rebecca.ungarino@barrons.com