BlackRock Stock To Edge Ahead Of Consensus In Q1?

BlackRock (NYSE: BLK) is scheduled to report its fiscal Q1 2021 results on Thursday, April 15. We expect BlackRock to likely beat the consensus estimates for revenues and earnings. BLK, the world’s biggest asset manager, has delivered better than expected results in each of the last four quarters. The company managed to deliver positive revenue growth in the full year 2020 revenues, mainly driven by growth in its Assets under Management (AuM). Further, the growth was also driven by market volatility due to the economic slowdown and headwinds in industries directly impacted by the Covid-19 crisis, which was also responsible for diverting investor funds toward BlackRock. We expect the above factors to drive the first-quarter FY2021 results as well.

Our forecast indicates that BlackRock’s valuation is around $830 per share, which is 6% more than the current market price of around $782. Look at our interactive dashboard analysis on BlackRock’s pre-earnings: What To Expect in Q1? for more details. 

(1) Revenues expected to slightly edge pass the consensus estimates in Q1

Trefis estimates BlackRock’s fiscal Q1 2021 revenues to be around $4.34 billion, marginally above the $4.28 billion consensus estimate. The company reported $16.2 billion in the full year 2020 revenues – up 11% y-o-y. This could be attributed to a 17% y-o-y rise in Assets under Management (AuM) from $7.43 trillion to $8.68 trillion at the end of December 2020. The AuM benefited from higher asset valuations and net fund inflows of around $391 billion in the year. We expect the higher asset valuations and net fund inflows to drive the first-quarter results.

Although BlackRock enjoyed favorable investor sentiment in 2020, it was partly due to headwinds in traditional industries directly impacted by the Covid-19 crisis. With improvement in the economy and expected mass availability of the Covid-19 vaccine, we expect some of the investor money to re-divert to other industries. That said, BLK is trying to make its offerings more competitive to gain market share and attract more funds. It recently reduced fees across a suite of nine US equity style investing exchange-traded funds (ETF). This is likely to enable its revenues to touch $18 billion in FY2021. Our dashboard on BlackRock revenues offers more details on the company’s segments.

2) EPS likely to be marginally ahead of the consensus estimates

BlackRock Q1 2021 adjusted earnings per share (EPS) is expected to be $8.37 per Trefis analysis, marginally above the consensus estimate of $8.32. The company reported 10% y-o-y growth in its net income in 2020, enabling its EPS figure to improve from $28.43 to $31.85. However, its operating margin decreased from 38.2% to 35.1% in the year, mainly driven by higher compensation costs and an increase in general & administration expense – the negative impact of higher expenses was offset by growth in non-operating income. Overall, BLK reported a slight decline in net income margin in 2020, from 30.8% to 30.4%. We expect the same trend to continue in Q1.

Thereafter, we expect the net income margin figure to remain around the same level as the 2020 figure for the full year 2021, leading to an EPS of $35.78.

(3) Stock price estimate 6% more than current market price

Going by our BlackRock valuation, with an EPS estimate of around $35.78 and a P/E multiple of close to 23x in fiscal 2021, this translates into a price of $830, which is 6% above the current market price of around $782.

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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