BlackRock reported better-than-expected earnings Wednesday, lifting shares of the asset management giant higher as it embarks on a pivotal year of expansion into fast-growing markets. Revenue of $5.68 billion in the three months ended Dec. 31 exceeded expectations of $5.49 billion, according to LSEG. Adjusted earnings per share (EPS) of $11.93 topped the consensus estimate of $11.19, LSEG data showed. Assets under management (AUM) totaled $11.55 trillion at the end of the quarter, a bit shy of the $11.65 trillion estimate, according to FactSet. BLK .SPX 1Y mountain BlackRock’s stock performance over the past 12 months versus the S & P 500. Bottom line BlackRock delivered a solid set of results that validated our decision to take a stake in mid-October. The stock had not done much through Tuesday’s close — in fact, it was down about 5% in that stretch — but the report showed BlackRock’s business is humming along. We’re reiterating our buy-equivalent 1 rating and price target of $1,150 a share. Keep in mind, though, that it’s not our style to buy a stock into a roughly 4% move like we’re seeing with BlackRock on Wednesday. “I had been beginning to think that maybe [BlackRock] stock had fallen out of favor,” Jim Cramer said Wednesday in reaction to earnings. In reality, it was just excessive negativity “in the face of what turned out to be very, very good numbers,” he said. The operator of iShares funds continues to rake in more client money, registering a record $281 billion in net inflows in the October-to-December period. That exceeds its previous all-time high of $211 billion in the third quarter. Assets under management of $11.55 trillion as of Dec. 31 was a miss versus expectations, but it’s still an increase versus a then-record $11.48 trillion at the end of September. Plus, CEO Larry Fink outlined a compelling vision of an even stronger BlackRock in the future as the company transforms itself into a bigger player in alternative investment strategies. The cherry on top — at least as far as BlackRock’s stock is concerned — was the second encouraging inflation report of the week released Wednesday morning, which sent stocks jumping and bond yields falling. BlackRock shares, already up more than 2% on earnings, took another leg higher on the inflation print. After softer wholesale inflation data Tuesday, the better-than-expected consumer report Wednesday boosted hopes that the Federal Reserve could still reduce interest rates multiple times this year. A strong jobs report last Friday muddied the rate-cut path . This matters to BlackRock because lower interest rates should prompt investors to move more of their cash out of money market funds into other assets, particularly BlackRock’s equity funds and private markets. Lower rates give stocks the room they need to run higher, and higher market valuations feed right into BlackRock’s fee-based business model. Think about it this way: a better-performing stock market should lead to a better-performing BlackRock. Additionally, executives expect the company’s fixed-income business to be supported by a general underallocation to that asset class. BlackRock also is aggressively pushing into private markets and, as part of that move, closed its $12.5 billion acquisition of Global Infrastructure Partners on the first day of the fourth quarter. GIP owns or has stakes in a wide range of infrastructure assets, including London Gatwick Airport, the Port of Melbourne and data centers. BlackRock also has two pending acquisitions to deepen its alternative assets presence: a $3.2 billion all-cash deal for private markets data provider Preqin, and a $12 billion all-stock transaction for HPS Investment Partners. HPS specializes in private credit, a booming pocket of finance that encompasses nonbank institutions making loans to companies. These deals will help BlackRock obtain “higher and more durable organic growth, greater resilience through market cycles and multiple expansion” for its stock, Fink said on the call. BlackRock (BLK) Why we own it: BlackRock is a premier asset gatherer perhaps best known for its family of iShares exchange-traded funds. However, the firm is wisely pushing into alternative strategies, such as infrastructure and private credit, with a series of acquisitions to fuel its next leg of growth. Led by venerable CEO Larry Fink, BlackRock has a track record of sustained asset and technology services growth while remaining disciplined on expenses to boost profitability. Initiation date: Oct. 16, 2024 Most recent buy: Jan. 8, 2025 Competitors: State Street , Vanguard, Apollo Global Management and Ares Management The Preqin and HPS transactions are expected to close in the first quarter and second quarter, respectively. On the call, Fink said he’s “very excited” by the client feedback BlackRock received on the HPS deal since it was announced last month. Fink sees a complementary relationship between Preqin, HPS and the broader BlackRock portfolio. BlackRock’s investment and risk management system called Aladdin is well-known among industry professionals. BlackRock bought eFront, a similar platform for alternative investments, in 2019 and combined it with Aladdin. “We did not do the HPS acquisition as a singular expansion. You have to overlay the design around buying Preqin and having eFront and bringing that together and having the ability to provide better data and analytics to these markets,” Fink said. “When you have better data and analytics, as you’re expanding new and frontier markets, they become large-scale markets through data analytics. And so we believe we will be the best-suited organization to take advantage of that expansion of the private credit markets in the future.” In a Wednesday morning interview on CNBC, Fink said BlackRock’s acquisition spree has run its course for right now. “We may do some minority investments, but … I don’t believe you’ll see BlackRock in the market buying whole companies,” he said. That seems wise because it allows BlackRock to focus its energies on successfully integrating GIP and soon Preqin and HPS. Quarterly commentary BlackRock’s topline beat was partially driven by higher performance fees, which came in at $451 million versus analyst expectations of $355 million, according to FactSet. The bulk of BlackRock’s investment advisory revenue is fees based on a percentage of the value of assets under management. For certain portfolios, though, BlackRock collects additional performance fees if the results meet agreed-upon levels. BlackRock saw 7% base fee growth in the fourth quarter, a sequential acceleration from 5% in the July-to-September period and its highest in three years. Breaking down BlackRock’s record flows, $201 billion came in the form of long-term net flows. Flows were up across all three regions — the U.S., Europe, the Middle East and Africa (EMEA) and Asia-Pacific (APAC) — and by client type: retail, ETFs and institutional. BlackRock demonstrated strong profitability in the quarter. Adjusted operating income of $2.33 billion came in solidly above the $2.16 consensus estimate, according to FactSet. Adjusted operating margin of 45.5% represented 9.4% year-over-year growth. It was a touch below the third-quarter figure of 45.8%, though. Looking ahead, BlackRock expects core general and administrative (G & A) expenses to rise in the mid-to-high single digits, excluding the HPS integration. BlackRock repurchased $375 million worth of stock in the fourth quarter, in line with guidance, and part of the $4.7 billion in cash it returned to shareholders via buybacks and dividends across 2024. That’s up from $4.5 billion in 2023. (Jim Cramer’s Charitable Trust is long BLK. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. 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Marquee at the main entrance to BlackRock headquarters building in Manhattan.
Erik Mcgregor | Lightrocket | Getty Images
BlackRock reported better-than-expected earnings Wednesday, lifting shares of the asset management giant higher as it embarks on a pivotal year of expansion into fast-growing markets.
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