BlackRock earnings: Market gains and inflows drive AUM and revenue to record highs
We plan to raise our fair value estimate of BlackRock stock.
Mentioned: BlackRock Inc (BLK)
Key Morningstar metrics for BlackRock
- Fair Value Estimate: $1,100.00
- Morningstar Rating: ★★★
- Morningstar Economic Moat Rating: Wide
- Morningstar Uncertainty Rating: High
What we thought of BlackRock’s earnings
BlackRock BLK ended September with a record $13.464 trillion in managed assets, up 17.3% year over year and above our estimate of $13.054 trillion. The company continues to benefit from flows into its passive offerings as well as ongoing market gains.
Why it matters: BlackRock continues to outdo its traditional asset management peers from the perspective of organic growth in assets under management, as its mix of index funds and exchange-traded funds continues to appeal more to investors than most active products. The expansion of the company’s private capital platform has only added to its ability to stay ahead of the group.
- Net long-term inflows of $171 billion represented an annualized organic AUM growth rate of 5.9% for the third quarter, above our annual target rate range of 3.0%-5.0%. We expect to see lower rates of growth from peers when they report.
- The iShares platform remains the biggest driver of flows for BlackRock. The company picked up a record $153 billion in net long-term inflows (equivalent to a 12.9% annualized organic AUM growth rate) from its ETF business during the third quarter.
The bottom line: While we had expected the back half of the year to pose more headwinds for flows and market gains as the impacts of the US government’s fiscal, tariff, and immigration policies became more apparent, BlackRock continues to benefit from ongoing market gains.
- While there was little in wide-moat-rated BlackRock’s third-quarter results that would alter our long-term view of the company, we expect to increase our $1,100 per share fair value estimate to $1,170 as we adjust the baseline for AUM in our valuation model.
- However, we will stay conservative with our near-term assumptions for BlackRock and the rest of the US-based asset managers.
- BlackRock continues to trade at a hefty premium relative to the price/earnings multiples of the other US-based traditional asset managers (which we think is warranted).
