I have owned and written about BlackRock (BLK) since October. It is a core holding in my income portfolio, as it has a solid yield and has raised its payouts tremendously over the years -- even through the financial crisis. The shares have gone from $187 to $257 in that time. The company continues to show solid growth as its businesses rise along with the equity and credit markets. Also, it has consistently beat earnings estimates. The recently reported quarter was no exception.
Here are the quarterly earnings highlights:
- EPS came in at $3.65 a share, seven cents above consensus estimates.
- Sales came in slightly above consensus led by iShares revenues, which were up more than 20% year over year.
- AUM increased 7% year over year to $3.94 trillion. Equity funds saw net inflows of over $33 billion.
- Adjusted operating margins increased 140bps to 40%.
BlackRock is one of the largest investment managers in the world. The firm provides its myriad services to institutional, intermediary, and individual investors.
Here are four reasons why BLK still has upside from $257 a share:
- Consensus earnings estimates for both FY 2013 and FY 2014 had consistently and significantly gone up before this earnings report. FY 2014's projections are $1 a share above where they were 90 days ago. I would look for further upward revisions after these quarterly results.
- BlackRock is well positioned for the migration from mutual funds to ETFs. It also should do well as cash starts to come back into the markets as the Fed continues to encourage investors to move into riskier assets. Finally, it does not have a huge gold ETF like State Street (STT), which is seeing major outflows.
- The company has now beat or met quarterly earnings estimates for 13 straight quarters (12 beats, one meet). BlackRock is expected to grow revenues at a 10% CAGR over the next two years and is selling for just over 14x 2014's projected earnings.
- BLK yields 2.6% and has quadrupled dividend payouts over the last six years or so. The stock has a reasonable five-year projected PEG (1.25) for a dividend payer.