KBW Analysts Downgrade BlackRock As Shares Start To Approach Their Target Price

BlackRock, Inc. BLK reported its 2Q16 results broadly in-line with consensus expectations. Keefe, Bruyette & Woods’ Robert Lee downgraded the rating on the company from Outperform to Market Perform, while reducing the price target from $390 to $383. The analyst commented that there was “moderate upside” to the price target.

BlackRock continues to have healthy organic growth prospects, “given its unmatched product breadth and distribution footprint, and its scale,” analyst Robert Lee mentioned. Moreover, the company has demonstrated its ability to generate operating leverage. While these factors should support BlackRock’s future earnings growth and profitability, this is largely priced into the stock.

2Q Results

Although the quarter was in-line with expectations, flows remained lower than anticipated. BlackRock’s revenues were adversely impacted by lower performance and management fees, with a more modest fee rate due to mix, Lee noted. He added that the company’s operating expenses came in-line with forecast, with higher compensation being offset by well controlled G&A.

The EPS estimates for 2016 and 2017 have been reduced from $19.23 to $19.00 and from $22.20 to $21.90, respectively, to reflect fine tuning of revenue and expense forecasts.

The analyst added that while long-term inflows were softer than expected, there seems to be “plenty of room for improvement.”

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