Mega investment company BlackRock, Inc. (BLK) is set to announce its fiscal first quarter (ended March 2024) earnings on April 12, 2024. In this article, I’ve discussed why waiting for a better entry point in this stock could be ideal.
The world’s largest asset manager, BLK had $10 trillion in AUM as of December 31, 2023, following $289 billion of full-year net inflows, including $96 billion in the fourth quarter.
For the fiscal first quarter ended March 2024, Street projects BLK’s revenue and EPS to rise 10.7% and 18.3% year-over-year to $4.70 billion and $9.38, respectively. However, worries regarding market basket pricing, order volumes, and the negative effects of foreign currency exchange rates on international franchise royalties and fees pose challenges to the company.
In terms of price performance, the stock has declined 3.6% over the past month but gained 24.6% over the past six months, closing the last trading session at $797.56.
Here is what could impact BLK’s performance in the upcoming months:
BLK Launches Tokenized Fund BUIDL
On March 20, BLK introduced its inaugural tokenized fund, the BlackRock USD Institutional Digital Liquidity Fund (BUIDL), on a public blockchain via Securitize Markets, LLC. This initiative allows qualified investors to earn U.S. dollar yields by subscribing to the Fund.
Expanding Wealth Management Offerings with New Acquisition
On March 8, BLK announced its intention to acquire the remaining equity interest in SpiderRock Advisors (SRA), a leading provider of customized option overlay strategies in the U.S. wealth market. This move expands BlackRock's commitment to personalized separately managed accounts (SMAs), meeting the growing demand from wealth managers for personalized, tax-efficient portfolios. ‘
As of February 2024, SRA's SMA strategies were estimated to have approximately $4.80 billion in client assets. Thus, SRA's SMA strategies are expected to play a significant role in BlackRock's wealth management offerings.
Mixed Financials
During the fiscal year 2023, BLK’s total revenue declined marginally year-over-year to $17.86 billion. While its total expenses rose marginally from the prior-year to $11.58 billion, adjusted operating income grew 1.8% year-over-year to $6.59 billion.
Moreover, adjusted net income attributable to BLK improved 5.6% and 6.8% year-over-year to $5.69 billion and $37.77 per share.
Mixed Profitability
BLK’s trailing-12-month gross profit margin of 48.70% is 18% lower than the industry average of 59.39%. Its trailing-12-month asset turnover ratio of 0.15x is 29.8% lower than the 0.21x industry average.
However, its trailing-12-month EBIT and EBITDA margins of 35.49% and 37.89% are favorably higher than the 22.65% and 21.83% industry averages.
Premium Valuation
In terms of non-GAAP forward P/E, the stock is currently trading at 19.56x, which is 88.6% higher than the 10.37x industry average. Its 5.87 forward Price/Sales multiple is 135.2% higher than the 2.49 industry average. Also, BLK’s 6.01x forward EV/Sales is 95.3% higher than the 3.08x industry average.
POWR Ratings Reflect Uncertainty
BLK has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. BLK has a C grade Growth, consistent with its mixed performance in the recent quarter.
The stock also has a C for Quality, which syncs with its mixed profit margins. Its 24-month beta of 1.62 aligns with its C grade in Stability.
Of the 44 stocks in the C-rated Asset Management industry, BLK is ranked #31.
Beyond what I’ve stated above, one can view BLK ratings for Growth, Value, Stability, and Quality here.
Bottom Line
Although BLK is trading above its 200-day moving average of $732,59, it is below its 50-day moving average of $807.48.
Moreover, BLK’s plans to acquire SpiderRock Advisors enhances its commitment to personalized SMAs in the U.S. wealth market.
While BLK shows promise for long-term growth, its mixed profitability, high beta value, and premium valuation multiples present challenges in the short term. Given these uncertainties, it might be wise for potential investors to wait for a more favorable opportunity to invest in BLK.
How Does BlackRock, Inc. (BLK) Stack Up Against Its Peers?
With its uncertain short-term outlook, BLK's chances of outperforming in the coming weeks and months are diminished. However, you might want to explore other stocks in the Asset Management industry that carry A (Strong Buy) and B (Buy) ratings.
Westwood Holdings Group Inc (WHG)
Silvercrest Asset Management Group Inc. (SAMG)
Crescent Capital BDC, Inc. (CCAP)
For exploring more asset management stocks, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
BLK shares were trading at $807.16 per share on Monday afternoon, up $9.60 (+1.20%). Year-to-date, BLK has gained 0.05%, versus a 9.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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