Why BlackRock Deserves To Trade At A Premium To Peers

Argus believes BlackRock, Inc. BLK should trade at a premium to large-cap financial stocks, given the company’s “above-average operating margins, stable long-term asset inflows, and history of product innovation.”

Q3

The comments came after BlackRock’s third-quarter EPS of $5.14 came in $0.16 ahead of the consensus on good cost controls. Revenues of $2.8 billion, however, missed Argus’ expectation. But, assets under management grew 13 percent, driven by healthy inflows and a rebound in market valuation.

In addition, the adjusted operating margin in the third quarter was 44.8 percent, up from 43.9 percent a year earlier.

Related Link: PNC's Stake In BlackRock A Solid Foundation For An Argus Upgrade

“We expect stronger earnings heading into 2017, aided by a continued rebound in AUM; market share gains, the continued rollout of new products, including factor-based solutions; and a lower compensation-to-revenue ratio,” analyst Stephen Biggar wrote in a note.

Rating, Expectations

Biggar, who maintains his Buy rating on Focus List selection BlackRock, said the AUM growth suggests the company’s ability to retain assets in various market environments. The analyst also expects continued improvement in the performance of actively managed funds, which was considered a weak spot for the company.

The analyst has a price target of $400 on BlackRock shares, which was last seen trading at $354.83, down 0.49 percent on the day.

Full ratings data available on Benzinga Pro.