BlackRock, the world’s largest asset manager, put up some big numbers in the third quarter.
BlackRock (NYSE:BLK) stock was up some 3.5% on Friday after the asset manager released sturdy earnings results that saw the firm hit a record $11.5 trillion in assets.
The world’s largest asset manager posted third quarter revenue of $5.2 billion, a 15% year-over-year increase. That topped estimates of $5.05 billion.
Net income rose 2% to $1.63 billion, or $10.90 per share, which exceeded estimates of $10.23 per share.
Further, its assets under management rose to an all-time high of $11.5 trillion, up 26% year over year and up 8.5% from the second quarter of 2024. Asset levels were buoyed in part by rising markets as the S&P 500 rose 5.5% in Q3. However, it also enjoyed record high inflows into its funds.
“Our strategy is ambitious, and our strategy is working,” Laurence Fink, BlackRock chairman and CEO, said. “The assets we manage on behalf of our clients reached a new high, ending the third quarter at $11.5 trillion, having grown $2.4 trillion over the last twelve months.”
Record inflows
This year, through the first three quarters, has been the best year for the S&P 500 since 1997. The large cap index was up 20.8% through Sept. 30, and it is now up 21.7% through October 11.
That has certainly been a boon for asset managers, particularly one as dominant as BlackRock. Asset management firms are largely cyclical, with their fortunes rising and falling with the markets, because when markets are up, its assets are higher, and it generates more fee revenue from higher asset balances.
BlackRock has been trying to change that to become more of an all-weather stock, by making investments in private market investing, bond funds, and through its technology business that offers portfolio and risk management services for institutional investors.
But its revenue is still highly dependent on good equity markets, so this is an ideal market for BlackRock. That’s why it had record inflows into its funds in Q3, with total net flows of $221 billion in the quarter, and $360 billion for the year.
BlackRock’s iShares ETFs have been the primary source of inflows, generated $97 billion in the quarter and $248 billion for the year. Its retail mutual funds saw just $7 billion in inflows in the quarter, while BlackRock saw a robust $56 billion come into its institutional separate accounts – funds built for institutional investors, like pension funds. It also saw a whopping $61 billion come into its cash products, like money market funds.
In addition, BlackRock generated $5 billion in inflows into its Bitcoin and cryptocurrency ETFs.
One of the more notable developments in the quarter was the surge in bond fund assets. In the third quarter, the firm saw about $63 billion in bond fund inflows, compared to $74 billion in equity fund inflows. That pivot to bond inflows was in anticipation of the Fed lowering interest rates, which should help bond funds, and that trend should continue in Q4.
“We are effectively leveraging our technology, scale, and global footprint to deliver profitable growth,” said Fink. “Quarterly revenue and operating income both set new records, up 15% and 26% year-over-year, respectively. Our 45.8% operating margin is up 350 basis points.”
Is BlackRock stock a buy?
BlackRock stock is up about 21.6% year-to-date (YTD) and it is no coincidence that the S&P 500 has performed similarly. But over the last decade, BlackRock stock has beaten the S&P 500, mainly because of its strength in fixed income assets, which provide a lift when equity markets are down.
For example, BlackRock stock has recorded an average annualized return of 18.6% over the past five years. compared to 14.6% for the S&P 500. Over the past 10 years, BlackRock stock has posted an annualized return of 12.3%, compared to 11.8% for the S&P 500.
The gap gets wider in favor of BlackRock when you look at the total returns with dividends reinvested. That’s because BlackRock has an excellent $5.10 per share quarterly dividend at a yield of 2.1%, and it has raised its dividend in each of the past 14 years.
BlackRock is reasonably valued with a forward P/E of 20, so right now it looks like a decent buy. The thing to know about BlackRock is, it is the dominant player in its market, so while it surges in bull markets, it also tends to outperform its competitors in down markets because of its fixed income and alternative investments. And it is working to further diversify into private markets and alternatives, which should help it even more down the road.
Over the next 12 months, it is unlikely that the markets will be as hot as they have been this year, so don’t expect the same type of returns. But, with a reasonable valuation, BlackRock stock should be a solid performer.