BlackRock 3Q Earnings Rise On Strong iShares ETF Revenue

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BlackRock, Inc. (NYSE:BLK)’s earnings during the third quarter rose on the strength of its iShares ETF business. The world’s largest asset manager generated $25.2 billion from iShares; the highest cash flow recorded since the company acquired the business from Barclays in December 2009. The company’s assets under management also increased by 10 percent, to $3.673 trillion during the quarter ended September 30.

BlackRock 3Q Earnings Rise On Strong iShares ETF Revenue

During the third quarter, BlackRock, Inc. (NYSE:BLK)’s $3.47 diluted earnings per share exceeded the $3.31 consensus estimate of Wall Street analysts.  During the same period last year, the company’s diluted EPS was $2.83.

The company’s adjusted profit was $610 million, a 17 percent increase, compared with its profit during the same period last year.

BlackRock posted $2.3 billion revenue, 4 percent higher than its $2.22 billion revenue during the same quarter in 2011. The company’s adjusted operating income of $876 million, up by 3 percent from its $849 operating income a year ago. Its adjusted operating margin was 40.7 percent during the period.

In a statement, Laurence D. Fink, chief executive officer of BlackRock said, “We achieved these results through robust new business generation across each of our channels, with particular strength in growth areas on which we’ve focused, including retail and iShares.”

In addition, Fink said BlackRock’s strong results in retail business were driven by  high-performing fixed-income products combined with continued demand for yield-oriented strategies. The company generated $6.2 billion retail fixed income in net new business, the highest income flow in 10 years.

During the third quarter, the company had $31.3 billion long-term net inflows, excluding the effect of a single, low-fee; and it had $74.2 billion institutional index fixed income outflow.

According to Fink, the company returned more than $2 billion cash to shareholders, through cash and share repurchases. He said, “We consistently demonstrated our commitment to strong capital management and driving enhanced shareholder value.  We remain committed to actively returning cash to our shareholders, while investing for future growth.”

Christopher Harris, senior analyst at Wells Fargo Equity Research, believes BlackRock, Inc. (NYSE:BLK)’s strong revenue is “likely driven by positive mix shift, stronger performance fees (one-quarter of rev beat) and possibly higher average AUM.”

On the other hand, Mathew Kelly and Kevin Kaczmarek, both analysts at Morgan Stanley (NYSE:MS), believe that the business model of BlackRock is uniquely positioned, citing its industry-leading ETFs and strong presence in alternatives and multi assets. They said, “We believe overhangs- including ETF pricing, reform uncertainty, and key man risk- have created an attractive entry point (12.5x P/E vs. peers at at 13.6x).

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