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BlackRock Earnings Preview: EPS, Revenue Growth Expected

BlackRock Earnings Preview: EPS, Revenue Growth Expected
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BlackRock (NYSE: BLK), shares of which reached a new multiyear high last week, is scheduled to report its first-quarter 2013 results Tuesday, April 16, before the opening bell.

Investors will be looking for BlackRock to build on the record fourth-quarter profits and record assets under management reported in the previous period, and for its iShares to remain the world's largest exchange-traded funds business.

See also: ETFs Set Q1 Record With $70.1B of Inflows

Expectations

Analysts on average predict that BlackRock will report revenues that have grown more than eight percent year-over-year to $2.44 billion. Per-share earnings are expected to come to $3.58 for the quarter, compared to $3.96 in the fourth quarter and $3.16 per share in first quarter of last year.

Sentiment is rising, as the consensus EPS estimate was $3.48 some 60 days ago. And note that analysts have underestimated BlackRock's EPS in the past ten quarters. The upside surprise was more than nine percent in the fourth quarter.

Strong fourth-quarter earnings results were attributed in part to increased demand for exchange traded funds. The company said fees continued to grow and assets under management climbed to a record high. The board increased the dividend and expanded the share buyback program as well. The share price rose more than six percent in the days following the earnings release.

Looking ahead to the current quarter, analysts expect both EPS and revenue to increase sequentially and year-over-year. So far, the full-year forecast has EPS more than 13 percent higher year-over-year and revenue up more than 10 percent. Both consensus EPS estimates have been rising in the past 60 days.

The Company

BlackRock is the world's largest investment manager. The firm primarily provides its services to institutional, intermediary and individual investors. It also manages accounts for corporate, public, union and industry pension plans, insurance companies, third-party mutual funds, endowments, foundations, charities, corporations, official institutions and banks.

It is an S&P 500 component with a market capitalization near $44.7 billion. It was founded in 1988, went public in 1999 and is headquartered in New York City. Laurence Fink is the chief executive, chairman and a co-founder.

Competitors include Legg Mason (NYSE: LM) and State Street (NYSE: STT). The former is expected to post a decline in EPS and revenue when it reports at the end of the month. State Street is on deck to report later this week, and analysts are looking for EPS up more than nine percent and revenue that is about three percent higher year-over-year.

See also: State Street Announces Buyback for Up to $2.1B Following Fed Test Results

During the three months that ended in March, BlackRock acquitted ETF business from Credit Suisse, appointed a new chief financial officer and replaced some of its portfolio managers. The company also announced about 300 job cuts and said it would exit the direct buyout business.

Performance

BlackRock's long-term EPS growth forecast is more than 12 percent. Its price-to-earnings (P/E) ratio is higher than the industry average, but so is its operating margin. The return on equity is higher than that of Legg Mason, and its dividend yield is about 2.6 percent.

The number of BlackRock shares sold short, as of the March 28 settlement date, represents a little more than one percent of the float. That is the lowest level of short interest since November. Days to cover is less than three.

Fourteen of 20 analysts surveyed by Thomson/First Call who follow the stock recommend buying shares, while none recommend selling. However, the mean price target, or where analyst expect the share price to go, represents only marginal potential upside relative to the current share price. But that target would be a new multiyear high.

The stock is up more than 23 percent year-to-date, though it has pulled back a bit from last week's 52-week high. The share price is currently above the 200-day and 50-day moving averages. Over the past six months, the stock has outperformed Legg Mason and the broader markets, but it has underperformed State Street.

See also: Weekly Preview: Earnings Season Kicks into High Gear

Posted-In: Blackrock Credit Suisse Legg MasonEarnings Long Ideas Short Ideas Previews Trading Ideas Best of Benzinga

 

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