On Friday, Goldman Sachs maintained their Buy rating and a $913.00 price target on BlackRock, Inc. (NYSE:BLK), following the company's first-quarter earnings report. BlackRock's adjusted earnings per share (EPS) for the first quarter of 2024 reached $9.81, surpassing both the Goldman Sachs estimate of $9.57 and the Visible Alpha Consensus Data of $9.37.
The operating income for the quarter was reported at $1,775 million, marking an increase of 3% quarter-over-quarter and 17% year-over-year, exceeding consensus predictions by 5%. This outperformance was attributed to higher alternative performance fees and greater margin expansion, driven by non-compensation expenses.
Despite the positive earnings, BlackRock's management fees came in at $3,778 million, falling short of consensus estimates by 1%. This was due to weaker-than-expected fee rate dynamics, with equity fee rates underperforming across all product types.
Additionally, the alternative fee rate decreased by 3 basis points quarter-over-quarter as certain fees expired and technology and risk management fees also came in slightly below expectations.
BlackRock experienced long-dated net inflows of $76.4 billion, which aligned with market expectations. However, these were partially offset by $19 billion in cash management outflows. Consequently, the company's long-term organic growth stood at 3%, with total organic growth at 2% for the quarter.
The inflows were notably bolstered by a strong quarter for iShares, which contributed $55 billion across fixed income and equity, and drove flows in alternatives, including the bitcoin ETF.
Goldman Sachs acknowledged that investor expectations were modest heading into the quarter, and characterized the results as mixed. While the company saw better operating leverage and a year-over-year margin expansion of 175 basis points, this was helped by unusually high performance fees.
The core revenue trends continue to fall short of management's targets, with organic base fee growth at 1% over the last twelve months and weaker trends in technology services.
Looking forward, BlackRock's management highlighted a clear perspective on the funding of substantial wealth, institutional, and Aladdin mandates, indicating potential growth acceleration.
However, Goldman Sachs noted that investor focus is likely to remain on the softer core revenue trends, particularly in management fees and technology, and the strategy to achieve organic base fee growth closer to the company's 5% target.
InvestingPro Insights
BlackRock, Inc. (NYSE:BLK) has demonstrated resilience and an ability to adapt to market conditions, as reflected in their recent first-quarter earnings report. According to InvestingPro data, BlackRock maintains a robust market capitalization of $116.92 billion USD, exhibiting a strong presence in the financial sector. The company's P/E ratio stands at 21.38, with a slight increase to 23.28 when adjusted for the last twelve months as of Q4 2023. This suggests that while the company trades at a premium, investors may be confident in its future earnings potential.
InvestingPro Tips highlight that BlackRock has raised its dividend for 14 consecutive years, which could be a sign of the company's commitment to returning value to shareholders. Additionally, 7 analysts have revised their earnings upwards for the upcoming period, indicating a positive outlook on the company's financial performance. It's also noteworthy that BlackRock's liquid assets exceed short-term obligations, providing a cushion for operational flexibility and financial stability.
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Overall, the data and insights from InvestingPro suggest that BlackRock continues to be a formidable player in the investment management industry, with potential for continued growth and shareholder value creation.
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