BlackRock Stock Is Likely To Report Mixed Q4 Results?

BlackRock (NYSE: BLK) is scheduled to report its fiscal Q4 2020 results on Thursday, January 14. We expect BlackRock to beat the earnings expectations, while revenues are likely to miss the mark. The lower than expected revenues are likely to be due to the diversion of some investor funds into other industries after the emergency use FDA approval for Pfizer and Moderna’s Covid-19 vaccines. Overall, the company is expected to report positive growth for the full year 2020 on a year-on-year basis.

Our forecast indicates that BlackRock’s valuation is around $707 per share, which is 7% lower than the current market price of around $756. Our interactive dashboard analysis on BlackRock Pre-Earnings has additional details.

(1) Revenues expected to be below the consensus estimates

Trefis estimates BlackRock’s fiscal Q4 2020 revenues to be around $3.72 billion, 0.5 billion below the $4.22 billion consensus estimate. The company saw a significant jump in its revenues in Q3 revenues – up 18% y-o-y to $4.37 billion, mainly driven by higher base and performance fees. The company has reported positive growth in 2020 due to the recovery in financial markets which improved the asset valuations and enabled fund inflows. However, with the positive news on the Covid-19 vaccine, investor funds are likely to see some diversion toward other industries like chemical, energy, power, manufacturing, hospitality, etc., which otherwise suffered due to the direct-impact of the pandemic. Overall, we expect the company to report $15.5 billion in the full year 2020 revenues – 6% more than the year-ago period. Thereafter, the top-line is expected to touch $16.6 billion in FY2021, mainly driven by growth in equity, fixed income, and alternate investment segments. Our dashboard on BlackRock Revenues offers more details on the company’s segments.

2) EPS likely to marginally beat consensus estimates

BlackRock Q4 2020 adjusted earnings per share (EPS) is expected to be $8.79 per Trefis analysis, almost 2% above the consensus estimate of $8.60. In the third quarter, the net income margin slightly dropped from 33.3% to 31.2% sequentially. We expect the margin figure to see some improvement in the fourth quarter. Overall, for the full-year, we expect the adjusted EPS to be higher at $30.82 compared to $28.51 in the previous year. Further, we expect the earnings figure to continue its positive trajectory and be around $33.95 in FY 2021.

(3) Stock price estimate lower than the current market price

Going by our BlackRock Valuation, with an EPS estimate of around $33.95 and a P/E multiple of around 21x in fiscal 2021, this translates into a price of $707, which is 7% below the current market price of around $756.

BlackRock stock has rallied more than 100% since the March 23 lows in 2020, and we believe that the stock is on the higher side. This is despite the positive revenue growth in 2020 and expected growth in FY 2021. While better than expected revenues did benefit its stock, headwinds in industries directly impacted by the Covid-19 crisis were also responsible for the rise. As the economy moves toward normalcy and the crisis is abated, we expect BlackRock’s stock price to see some correction.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year

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