Rising 24% In The Last Six Months, How Will BlackRock Stock Trend After 2024 Q1 Results?

BlackRock (NYSE: BLK) is scheduled to report its fiscal Q1 2024 results on Friday, April 12, 2024. We expect BlackRock to outperform the consensus estimates for revenues and earnings. The company surpassed the street expectations in the last quarter, with total revenues improving 7% y-o-y to $4.46 billion. It was primarily driven by a 6% rise in the base fees (total investment advisory, administration fees & securities lending revenue). In addition, the average assets under management (AuM) increased 11% y-o-y to $9.38 trillion in the quarter. We expect the same trend to continue in Q1. Our interactive dashboard analysis on BlackRock’s Earnings Preview has more details. 

Amid the current financial backdrop, BLK stock has witnessed gains of 10% from levels of $720 in early January 2021 to around $805 now, vs. an increase of about 40% for the S&P 500 over this roughly 3-year period. However, the increase in BLK stock has been far from consistent. Returns for the stock were 27% in 2021, -23% in 2022, and 15% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that BLK underperformed the S&P in 2022 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Financials sector including JPM, V, and MA, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could BLK face a similar situation as it did in 2022 and 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

We estimate BlackRock’s valuation to be around $853 per share which is 6% above the current market price. 

(1) Revenues expected to beat the consensus estimates

BlackRock’s revenues slightly declined to $17.86 billion in FY2023.

• The base fees marginally decreased to $14.4 billion in the year. Further, distribution fees were down 9% over the same period. We expect them to see some recovery in Q1.
• BlackRock technology services fees grew 9% y-o-y. We expect the same momentum to continue in the first quarter.
• Overall, BlackRock’s revenues are likely to touch $20 billion in FY2024.

Trefis estimates BlackRock’s fiscal Q1 2024 revenues to be around $4.71 billion, 1% above the $4.67 billion consensus estimate. 

2) EPS to beat the consensus

BlackRock Q1 2024 adjusted earnings per share (EPS) is expected to be $9.57 per Trefis analysis, 3% above the consensus estimate of $9.28. The adjusted net income was $5.5 billion in FY 2023 – up 6% y-o-y. It was mainly due to a jump in non-operating income from -$95 million to $880 million, more than offsetting the negative impact of lower revenues and a drop in operating margin. We expect the net income margin to see some improvement in the first quarter. Overall, BlackRock is likely to report an annual GAAP EPS of $39.00 for the full year 2024.

(3) The stock price estimate is 6% higher than the current market price

We arrive at BlackRock’s valuation, using an EPS estimate of around $39.00 and a P/E multiple of 22x in fiscal 2024. This translates into a price of $853, which is 6% higher  than the current market price. 

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year 

[1] Returns as of 4/10/2024
[2] Cumulative total returns since the end of 2016

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