Balanced View on BlackRock - Analyst Blog

On May 19, 2014, we issued an updated research report on BlackRock Inc. BLK. The rise in assets under management (AUM) and opportunistic acquisitions will likely continue to support its financials. However, mounting expenses and high dependence on fee-based revenues make us apprehensive.

BlackRock's first-quarter earnings of $4.43 per share outpaced the Zacks Consensus Estimate by 7.8%. Results benefited from rise in revenues, partially offset by higher expenses.

Further, BlackRock's strong presence across the globe and its broad diversification will continue to aid organic growth. Also, the company's initiatives for the iShares and exchange-traded fund ETF business will further help in expanding its top line.

Also, BlackRock is an attractive pick for yield-seeking investors, given its strong capital deployment activities. In Jan 2014, the company announced a 15% hike in dividend to $1.93 per share. Further, the company has a steady share repurchase program in place.

On the flip side, mounting operating expenses remain a major concern. BlackRock continues to witness higher expenses due to increased marketing costs as well as a rise in compliance costs. We believe that this would continue to hamper bottom-line growth going forward.

Further, the Zacks Consensus Estimate over the last 30 days has shown mixed movements. For 2014, the Zacks Consensus Estimate increased nearly 1% to $18.45 per share, while for 2015 it declined 0.4% to $21.01 per share.

Presently, BlackRock has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked investment management stocks include Affiliated Managers Group Inc. AMG, Woori Finance Holdings Co., Ltd. WF and Cohen & Steers Inc. CNS. All of these have a Zacks Rank #1 (Strong Buy).

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