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I have been positive on and have owned Blackrock (NYSE:BLK) for four months now. However, its recent earnings report surprised even me on the upside for numerous reasons. Investors looking to increase their exposure to the financial sector should consider hitching their wagon to this financial standout. The stock is a core position in the value/income portion of my portfolio due to its almost 3% yield and its history of aggressively moving up its dividend payouts over the past decade.

Positives from this week's earnings report:

  • Net earnings for both 4Q and fiscal 2012 were its best in history
  • Fourth quarter earnings came in at $3.95 a share, easily beating consensus estimates calling for $3.73 a share:
  • Revenue also came in $50mm above consensus.
  • Assets under management increased 8% to almost $4T ($3.8T) and the company also decided to raise its dividend payout by some 12%.

BlackRock primarily provides its services as an investment manager to institutional, intermediary, and individual investors. It also manages accounts for corporate, public, union and industry pension plans, insurance companies, third-party mutual funds, endowments, foundations, charities, corporations, official institutions, and banks.

4 reasons BLK still has upside from just over $230 a share:

  1. The company will be a primary beneficiary of investors substituting ETFs like iShares for mutual fund investments and also from the retail investor coming back into the market after a five year hiatus. iShares fees grew 23% Y/Y and now make up approximately 30% of total base fees.
  2. Citigroup, which has a "Buy" rating on the stock, raised its price target to $265 from $240 a share after earnings. Look for more upgrades and price target raises in the coming weeks as analysts digest this stellar earnings report.
  3. The stock will now yield 2.9% and the company has quadrupled its dividend payout over the past seven years.
  4. Consensus earnings estimates for both FY2013 and FY2014 had already gone up nicely in the three months prior to this report and I would look for this trend to continue in the coming month. The shares are very reasonable price at just over 13x forward earnings and a five year projected PEG of just 1.20. The company has also beat earnings estimates for 11 of the last 12 quarters (it met earnings estimates the one other quarter in measuring period).
Source: Behind BlackRock's Blowout Numbers