BlackRock Stock To Beat The Street Expectations In Q2

BlackRock (NYSE: BLK) is scheduled to report its fiscal Q2 2023 results on Friday, July 14, 2023. We expect BlackRock to top the consensus estimates for revenues and earnings. The company surpassed expectations in the last quarter, despite a 10% y-o-y decrease in the top line to $4.24 billion. The revenues suffered due to lower average assets under management (AuM) and a drop in performance fees. Notably, the average AuM was down due to lower market valuations and dollar appreciation – the average AuM decreased 8% y-o-y to $8.9 trillion. We expect the second quarter results to be on similar lines.

We estimate BlackRock’s valuation to be around $754 per share which is 10% above the current market price. Our interactive dashboard analysis on BlackRock’s Earnings Preview has more details. 

(1) Revenues expected to beat the consensus estimates

BlackRock’s revenues decreased 8% y-o-y to $17.9 billion in FY2022. Further, the Q1 2023 revenues were down 10% y-o-y to $4.24 billion.

• The performance fees decreased in Q1 due to lower revenue from alternative products.
• The base fees declined by 9% y-o-y to $3.5 billion in Q1, mainly due to lower average AuM. We expect the second-quarter results to be on similar lines.
• BlackRock technology services fees were at the same level as the previous year. We expect it to see some improvement in Q2.
• Overall, we expect BlackRock’s revenues to touch $18.41 billion in FY2023.

Trefis estimates BlackRock’s fiscal Q2 2023 revenues to be around $4.48 billion, slightly above the $4.40 billion consensus estimate. 

2) EPS to marginally beat the consensus estimates

BlackRock Q2 2023 adjusted earnings per share (EPS) is expected to be $8.62 per Trefis analysis, 3% above the consensus estimate of $8.38. The adjusted net income decreased 12% y-o-y in FY2022. Further, the same trend continued in the first quarter of 2023 – net income reduced by 19% y-o-y to $1.16 billion. It was because of a decline in revenues and a drop in operating margin from 37.5% to 33.9%. We expect the net income margin to see some improvement in Q2. Overall, BlackRock is likely to report an annual GAAP EPS of $33.84 for the full-year 2023.

(3) Stock price estimate is 10% higher than the current market price

We arrive at BlackRock’s valuation, using an EPS estimate of around $33.84 and a P/E multiple of just above 22x in fiscal 2023. This translates into a price of $754, which is 10% more than the current market price of close to $684. 

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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[1] Month-to-date and year-to-date as of 7/10/2023
[2] Cumulative total returns since the end of 2016

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