BlackRock Stock To Edge Past The Street Expectations In Q4?

BLK: BlackRock logo

BlackRock (NYSE: BLK) is scheduled to report its fiscal Q4 2021 results on Friday, January 14, 2022. We expect BlackRock to edge past the consensus estimates for revenues and earnings. The asset management behemoth surpassed the estimates in the last quarter, with its top-line increasing 16% y-o-y. The revenue growth was primarily driven by higher base fees and an increase in distribution fees. Further, it reported total long-term fund inflows of $98 billion in Q3. We expect the same trend to continue in the fourth-quarter results. 

We estimate BlackRock’s valuation to be around $974 per share which is 10% above the current market price. This represents a P/EBITDA multiple of 196 for the company based on our forecast for BlackRock’s EBITDA for the current fiscal year. Our interactive dashboard analysis on BlackRock’s Earnings Preview has more details. 

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(1) Revenues expected to be marginally ahead of the consensus estimates

BlackRock’s revenues for full-year 2020 grew 11% y-o-y to $16.2 billion. It was partly due to asset growth and partly due to the headwinds in other industries which led to the diversion of funds toward BlackRock.

  • The company had a strong run in 2020 driven by growth in Assets under Management (AuM), which benefited from higher asset valuations and net fund inflows of around $391 billion. Notably, total AuM increased 17% y-o-y to $8.68 trillion at the end of December 2020. It resulted in a 7% y-o-y rise in the total investment advisory, administration fees, and securities lending revenue (base fees) to $12.6 billion. Further, the same trend continued in the first three quarters of 2021, leading to a 22% jump in the base fees to $11.3 billion. On similar lines, AuM increased 9% to $9.47 trillion between December 2020 and September 2021. We expect the fourth-quarter results to witness the same momentum.
  • BlackRock technology services revenues grew 17% y-o-y to $1.1 billion in 2020, primarily reflecting higher revenue from Aladdin. Further, the segment has increased 13% y-o-y to $942 million over the first nine months of 2021. It was partly due to organic growth and partly due to the acquisition of Aperio. We expect it to continue the same trend in the fourth quarter.
  • Overall, we expect BlackRock’s revenues to remain around $19.4 billion for FY2021.

Trefis estimates BlackRock’s fiscal Q4 2021 revenues to be around $5.17 billion, just above the $5.13 billion consensus estimate. We expect the asset growth to drive the fourth-quarter results.

Moving forward, we expect BlackRock’s AuM and technology revenues to maintain their growth trajectory over the subsequent quarters. Our dashboard on BlackRock’s revenues offers more details on the company’s operating segments along with our forecast for the next two  years.

2) EPS is likely to top the consensus estimates

BlackRock Q4 2021 adjusted earnings per share (EPS) is expected to be $10.37 per Trefis analysis, almost 3% above the consensus estimate of $10.07. The higher revenues in 2020 translated into a 10% increase in the adjusted net income to $4.9 billion. Further, the adjusted net income grew 26% y-o-y to $4.3 billion over the first three quarters of 2021, thanks to the revenue growth and lower expenses as a % of revenues. We expect the same trend to drive the fourth-quarter results.

Overall, BlackRock is likely to report an adjusted net income of $5.9 billion and annual EPS of $38.32 for full-year 2021. 

(3) Stock price estimate 10% more than current market price

We arrive at BlackRock’s valuation, using an EPS estimate of around $38.32 and a P/E multiple of just above 25x in fiscal 2021. This translates into a price of $974, which is 10% more than the current market price of close to $888. 

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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 Returns Jan 2022
MTD [1]
YTD [1]
Total [2]
 BLK Return -2% -2% 135%
 S&P 500 Return -1% -1% 110%
 Trefis MS Portfolio Return -4% -4% 276%

[1] Month-to-date and year-to-date as of 1/12/2022
[2] Cumulative total returns since the end of 2016

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