BlackRock (NYSE: BLK) is scheduled to report its fiscal Q3 2023 results on Friday, October 13, 2023. We expect BlackRock to beat the consensus estimates for revenues and earnings. The company outperformed the earnings expectations in the last quarter, while the revenues were slightly below the mark. It reported total revenues of $4.46 billion – down 1% y-o-y, primarily driven by a marginal drop in the base fees (total investment advisory, administration fees & securities lending revenue) and distribution revenues. In terms of Assets under Management, the firm posted an average AuM of $9.19 trillion in the quarter – up 2% y-o-y. We expect the top line to see a year-on-year growth in the third quarter. Our interactive dashboard analysis on BlackRock’s Earnings Preview has more details.
We estimate BlackRock’s valuation to be around $803 per share which is 24% above the current market price. Interestingly, BlackRock stock had a Sharpe Ratio of 0.4 since early 2017, which is lower than 0.6 for the S&P 500 Index over the same period. This compares with the Sharpe of 1.23 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.
(1) Revenues expected to top the consensus estimates
BlackRock’s revenues declined 6% y-o-y to $8.7 billion in the first half of FY2023.
- The base fees decreased 5% y-o-y in the first two quarters of the year. Similarly, Distribution fees were down 14% over the same period. We expect the numbers to see some recovery in the third quarter.
- BlackRock technology services fees grew 4% y-o-y. We expect the same trend to continue in Q3.
- Overall, BlackRock’s revenues are likely to touch $18.38 billion in FY2023.
Trefis estimates BlackRock’s fiscal Q3 2023 revenues to be around $4.62 billion, slightly above the $4.57 billion consensus estimate.
2) EPS to beat the consensus
BlackRock Q3 2023 adjusted earnings per share (EPS) is expected to be $8.72 per Trefis analysis, 2% above the consensus estimate of $8.56. The adjusted net income was $2.52 billion in the first two quarters of 2023, which was at the same level as the year-ago figure. That said, the net income was up 27% y-o-y in the last quarter due to an improvement in the non-operating income. We expect the numbers to be on similar lines in Q3. Overall, BlackRock is likely to report an annual GAAP EPS of $34.19 for the full-year 2023.
(3) The stock price estimate is 24% higher than the current market price
We arrive at BlackRock’s valuation, using an EPS estimate of around $34.19 and a P/E multiple of just above 23x in fiscal 2023. This translates into a price of $803, which is 24% higher than the current market price.
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
|S&P 500 Return||0%||12%||92%|
|Trefis Reinforced Value Portfolio||-2%||21%||522%|
 Month-to-date and year-to-date as of 10/9/2023
 Cumulative total returns since the end of 2016