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BlackRock stocks are a way to capitalize on the surge in bond fund inflows. BlackRock headquarters in New York City.
Michael Nagle/Bloomberg
Black rock
beat earnings expectations for the second quarter, but net inflows for the asset manager fell short of expectations.
Black rock
(ticker: BLK) reported adjusted earnings per share of $9.28 per share for the second quarter, compared to $7.36 for the year-earlier period. Quarterly revenue was $4.46 billion, down 1% from the prior year.
That’s what analysts on Wall Street predict
Black rock
would report earnings of $8.52 per share on revenue of $4.47 billion, according to FactSet.
“BlackRock generated industry-leading net inflows of $190 billion in the first half of 2023, including $80 billion in the second quarter. Our strong investment performance and deep customer partnerships have led to continued organic growth,” CEO Larry Fink said in the company statement.
Analysts had expected net inflows of $109 billion for the second quarter.
BlackRock shares rose 1.4% in premarket trading on Friday, after gaining more than 8% in the past five trading days.
This is the latest news. Read a preview of BlackRock’s earnings below and check back soon for more analysis.
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By the end of the first quarter, BlackRock reported assets under management of approximately $9.09 trillion, up 6% from Q4 2022, but still down 5% from a year ago. As the stock market has since recovered, analysts now expect assets under management to rise again to $9.37 trillion in the second quarter.
Net asset inflows — the excess cash investors put into BlackRock funds — is expected to reach $109 billion from April to June, roughly on par with the previous two quarters, but up 20% from a year ago.
Bond funds have driven much of BlackRock’s inflows. With the Federal Reserve raising its target rate by five percentage points in just over a year, yields on fixed income are now at their highest level in years. Capital flows into the bond market are likely to continue to accelerate and BlackRock is well positioned to benefit from this.
“BLK is an attractive way to capitalize on the looming surge in fixed income inflows, both on the active and passive sides – with particular power to garner greater share as the secular growth of passive assets continues,” Keefe, Bruyette & Woods analyst Michael Brown, wrote in a Tuesday comment.
Brown upgraded BlackRock stock to Outperform from Market Perform, noting that the asset manager’s diverse product lines mean it is more balanced and resilient than many peers. He also sees opportunities for growth through equity and international expansion.
Brown raised his price target for the stock from $763 to $835. At least three other analysts also raised their target this week. The consensus now suggests that analysts expect BlackRock shares to hit $794 in the next 12 months, up 7.3% from the current level of $740 per share.
Model portfolio is another thriving corner of the industry, where asset managers such as BlackRock, Vanguard and
Karl Schwab
bundle a variety of funds into ready-made packages and then sell them to financial advisors.
Last year, more than half of U.S. asset flows into BlackRock’s iShares products — mostly diversified index-tracking ETFs — came from model portfolios, Salim Ramji, the company’s global head of iShares and index investing, recently told Bloomberg.
That’s more than about a third of flows just two years earlier. Ramji said he expects model portfolios across the industry to grow to a $10 trillion business in the next five years, from its current size of $4.2 trillion.
BlackRock also caused quite a stir recently when it filed with the Securities and Exchange Commission to launch a spot Bitcoin ETF that would track the price of the cryptocurrency.
While previous applications from other asset managers have been rejected or are pending, crypto experts believe BlackRock has a better chance of securing SEC approval for the first Bitcoin ETF in the US, thanks in part to a mechanism that allows authorities to identify suspicious transactions. can follow. acts through a surveillance sharing agreement.
At the moment, it is difficult for investors to integrate cryptocurrency holdings into their portfolios, as this often requires a separate account. A Bitcoin ETF would give investors a trusted and regulated way to own the token. Bloomberg ETF analyst Eric Balchunas estimates that $30 trillion in capital could be unlocked if a spot Bitcoin ETF becomes available.
Still, despite the many headwinds, investors are eyeing whether BlackRock could fall victim to the emerging “anti-woke” movement, with Republican lawmakers asking state agencies to sever ties with companies that consider environmental, social, and governance concerns or so. . called ESG factors in their business and investment decisions.
BlackRock CEO Larry Fink was candid about his support for addressing ESG risk in investment strategies. This has made the asset manager a prime target for the conservatives.
Lately, Fink has been shying away from using the term ESG, saying he is embarrassed that the word has been used as a weapon in political debates.
Write to Evie Liu at evie.liu@barrons.com
