BlackRock’s stock (NYSE: BLK) has gained 7% YTD as compared to the 19% rise in the S&P500 index over the same period. Further, at its current price of $757 per share, the stock is trading 6% below its fair value of $803 – Trefis’ estimate for BlackRock’s valuation. The company surpassed the consensus estimates of earnings in the second quarter of 2023, but revenues marginally missed expectations. It reported total revenues of $4.46 billion, which was 1% below the year-ago figure. The top line suffered due to a slight drop in the distribution fees and base fees (total investment advisory, administration fees & securities lending revenue). Notably, the average AuM was up by 2% y-o-y to $9.19 trillion and total net inflows were $80 billion in Q2. On the cost front, the operating expenses as a % of revenues witnessed a marginal increase. However, it was more than offset by an increase in non-operating income from -$347 million to $251 million. Overall, the adjusted net income improved by 27% y-o-y to $1.37 billion.
The total revenues decreased by 6% y-o-y to $8.7 billion in the first half of 2023. It was primarily driven by a 5% drop in the base fees, followed by a 14% decline in the distribution fees. On the flip side, the top line was somewhat supported by a 4% rise in technology service revenues. Further, the non-operating income increased from -$485 million to $367 million, offsetting the negative impact of lower revenues. It led to an adjusted net income of $2.52 billion – at par with the year-ago figure.
Moving forward, we expect the average AuM to see some growth over the subsequent quarters. Altogether, BlackRock revenues are estimated to touch $18.38 billion in FY2023. Additionally, BLK’s adjusted net income margin is likely to see a slight drop in the year, resulting in an adjusted net income of $5.13 billion and an annual GAAP EPS of $34.19. This coupled with a P/E multiple of just below 24x will lead to a valuation of $803.
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|S&P 500 Return||2%||19%||103%|
|Trefis Multi-Strategy Portfolio||6%||26%||305%|
 Month-to-date and year-to-date as of 7/25/2023
 Cumulative total returns since the end of 2016