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BlackRock Inc.’s (NYSE:BLK) second quarter 2011 adjusted earnings came in at $3.00 per share, fairly ahead of the Zacks Consensus Estimate of $2.92.

The result also compares favorably with last year's earnings of $2.96 and the prior-quarter's earnings of $2.37.

Adjusted results for the quarter leave out the PNC LTIP funding obligation, Merrill Lynch compensation contribution and income tax law changes.

GAAP net income came in at $619 million or $3.21 per share, against $568 million or $2.89 per share in the prior quarter and $432 million or $2.21 per share in the year-ago quarter.

Better-than-expected results were primarily aided by strong top-line growth, owing to a better investment performance and asset mix, which were offset partially by higher operating expenses.

On June 1, 2011, BlackRock completed the repurchase of Bank of America Corporation’s (NYSE:BAC) remaining ownership interest of 13.6 million preferred shares for approximately $2.5 billion. The company issued $2.0 billion in debt to raise funds for the deal.

Quarter in Detail

On an operating basis, BlackRock’s total revenue in the quarter increased 4% sequentially and 17% year over year to $2.23 billion. However, total revenue missed the Zacks Consensus Estimate of $2.34 billion.

Total expenses remained almost flat sequentially but crept up 11% year over year to $1.48 billion. The year-over-year increase reflects a significant rise in employee compensation and benefits expenses, general and administration expenses, and direct fund expenses.

BlackRock’s operating income on a GAAP basis stood at $866 million, up 9% from $798 million in the prior quarter and 24% from $697 million in the year-earlier quarter.

Asset Position

Assets under management totaled $3.66 trillion as of June 30, 2011, almost flat sequentially but up 16% year over year. The increase was driven by market and competitive investment performance. Net new business in long-term products was $18.4 billion during the reported quarter.

Our Take

Results for the reported quarter reflect financial strength in the company. Though there are concerns related to the sluggish economic recovery, we expect BlackRock to continue benefiting from the growing need for risk management solutions within the financial industry.

BlackRock currently retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.

Source: BlackRock Rocks Its Q2 Earnings