What's In The Cards For BlackRock (BLK) In Q4 Earnings?

BlackRock, Inc. (NYSE:BLK) is slated to report fourth-quarter and 2019 results on Jan 15, before the opening bell. Its revenues and earnings in the quarter are expected to have improved on a year-over-year basis.

In the third quarter, the company’s earnings surpassed the Zacks Consensus Estimate. Results were driven by an improvement in revenues and growth in assets under management (AUM), partly offset by higher expenses.

Notably, BlackRock does not have an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in only two of the trailing four quarters, with a positive surprise of 0.9%, on average.

Nevertheless, its business activities and prospects in the fourth quarter encouraged analysts to revise earnings estimates upward. The Zacks Consensus Estimate for earnings of $7.65 for the to-be-reported quarter has moved 3.5% upward over the past seven days. Moreover, the figure indicates rise of 25.8% from the year-ago quarter’s reported figure.

The consensus estimate for sales for the fourth quarter is pegged at $3.88 billion, which suggests an increase of 13% from the prior-year quarter’s reported number.

Before we take a look at what our quantitative model predicts for the fourth quarter, let’s discuss the factors that are likely to have impacted results.

Key Factors to Note

BlackRock remains a dominant player in the ETF market, given its continued investments in the U.S. iShare core ETFs. Moreover, as investors are increasing allocations toward ETFs instead of alternative investments to reduce management costs, the company’s iShares inflows are expected to have remained strong in the fourth quarter. Thus, driven by steady inflows, total AUM is likely to have improved in the quarter.

The Zacks Consensus Estimate for total AUM for the fourth quarter is pegged at $7.46 trillion, indicating growth of 7.2% from the prior quarter’s reported number.

Driven by increase in assets; investment advisory, administration fees and securities lending revenues, which constitute more than 80% of the company’s total revenues, are expected to have improved in the quarter. The Zacks Consensus Estimate for the same is pegged at $3.09 billion, suggesting rise of 3.7% from the previous quarter’s reported figure.

Moreover, performance fee, which is also a major revenue component, is likely to have increased in the quarter. The Zacks Consensus Estimate for performance fees for the fourth quarter is pegged at $160 million, which indicates rise of 32.2% sequentially.

BlackRock’s expenses have remained elevated over the past few years. As the company continues with its restructuring initiatives to modify the size and shape of its workforce and improve operating efficiency, overall costs are expected to have increased in the to-be-reported quarter as well.

Management expects general and administration (G&A) expenses in the fourth quarter to be seasonally higher than the first three quarters of the year.

Earnings Whispers

According to our quantitative model, it cannot be conclusively predicted whether BlackRock will be able to beat the Zacks Consensus Estimate in the fourth quarter. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — which is required to be confident of an earnings surprise call.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for BlackRock is 0.00%.

Zacks Rank: The company currently carries a Zacks Rank #2 (Buy). While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings surprise call.

Stocks Worth a Look

Here are some finance stocks that you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model.

TD Ameritrade Holding Corporation (NASDAQ:AMTD) has an Earnings ESP of +1.85% and a Zacks Rank #3 at present. The company is slated to release results on Jan 21.

Associated Banc-Corp (NYSE:ASB) is slated to release results on Jan 23. It presently has an Earnings ESP of +1.10% and a Zacks Rank #3.

Federated Investors, Inc (NYSE:FII) is slated to release results on Jan 30. It currently has an Earnings ESP of +2.13% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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