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Why is an Earnings Beat Less Likely for BlackRock (BLK) in Q3?

BlackRock, Inc. BLK is slated to report third-quarter 2022 results on Oct 13, before the opening bell. Its revenues and earnings for the quarter are expected to have witnessed year-over-year declines.

In second-quarter 2022, BLK’s earnings missed the Zacks Consensus Estimate. Results were adversely impacted by an unfavorable operating backdrop, leading to lower revenues and assets under management (AUM) balance. A modest decline in expenses was a tailwind.

BlackRock has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, delivering a surprise of 4%, on average.

BlackRock, Inc. Price and EPS Surprise


BlackRock, Inc. price-eps-surprise | BlackRock, Inc. Quote

The company’s business activities and prospects in the to-be-reported quarter have not encouraged analysts to revise earnings estimates upward. The Zacks Consensus Estimate for BlackRock’s third-quarter earnings of $8.19 has been revised 1.1% lower over the past 30 days. The figure indicates a decline of 25.2% from the year-ago quarter’s reported number. Our estimate for earnings is $9.16.

The consensus estimate for third-quarter sales is pegged at $4.52 billion, which suggests a decline of 10.5% from the prior-year quarter’s reported number. Our estimate for sales is $4.69 billion.

Before we take a look at what our quantitative model predicts for the to-be-reported quarter, let’s discuss the factors that are likely to have impacted the company’s quarterly performance.

Key Factors & Estimates for Q3

BlackRock has been a dominant player in the exchange traded fund (“ETF”) market, given its continued investments in the U.S. iShare core ETFs. With investors increasing allocations toward ETFs instead of alternative investments to reduce management costs, the company’s iShares inflows have been strong over the past several quarters.

Supported by expected asset inflows, BlackRock’s AUM balance is likely to have improved in the third quarter, positively impacting related fees. The Zacks Consensus Estimate for total AUM is pegged at $8.78 trillion, suggesting a sequential rise of 3.4%. Our estimate for total AUM for the third quarter is $9.09 trillion.

The Zacks Consensus Estimate for the company’s investment advisory performance fees is pegged at $144 million, indicating a rise of 35.8% from the previous quarter’s reported number. Our estimate for performance fees is $207.7 million.

The Zacks Consensus Estimate for total investment advisory, administration fees and securities-lending revenues for the to-be-reported quarter is pegged at $3.60 billion, suggesting a sequential decline of 2.4%. Our estimate for the same is $3.74 billion.

The consensus estimate for distribution fees of $383 million indicates a rise of 6.1% from the previous quarter’s reported figure. Our estimate for the same is $376.4 million.

BlackRock’s expenses have been elevated over the past few years. Given that the company has been continuing with its restructuring initiatives to modify the size and shape of its workforce, and improve operating efficiency, overall costs are expected to have increased in the third quarter. Our estimate for third-quarter total expenses is $2.90 billion.

Earnings Whispers

According to our quantitative model, the chances of BlackRock beating the Zacks Consensus Estimate for earnings this time are low. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — which is required to be confident of an earnings surprise call.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for BlackRock is -7.79%.

Zacks Rank: The company currently carries a Zacks Rank #3.

Stocks Worth a Look

A couple of finance stocks that you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases, per our model, are JPMorgan JPM and Associated Banc-Corp ASB.

The Earnings ESP for JPMorgan is +2.50% and it carries a Zacks Rank #2 (Buy) at present. The company is slated to report third-quarter 2022 results on Oct 14.

Associated Banc-Corp is scheduled to release third-quarter 2022 earnings on Oct 20. The company, which sports a Zacks Rank #1 (Strong Buy) at present, has an Earnings ESP of +2.39%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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