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BlackRock shares rise after earnings beat




Black stone
‘s

Adjusted earnings for the first quarter beat expectations, and net income surprised on the upside, pushing the stock higher in premarket trading.

Adjusted earnings were $7.93 per share in the first quarter, beating estimates of $7.78.

Analysts closely monitor the firm’s long-term net inflows, which include equity and bond products, private equity and alternative investments, but not cash management money market funds. BlackRock reported that as $103 billion, higher than analysts’ expectations of $77.2 billion.

This is news. Below is a preview written before the results were published.

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When BlackRock reports first-quarter earnings early Friday, expect to hear less emphasis on ESG investing. Listeners will also hear a new voice on the analyst call, that of CFO Martin Small.

In October, the world’s largest asset manager announced that Gary Shedlin would step down after BlackRock (ticker: BLK ) completed its reporting processes for fiscal 2022. Friday’s earnings call will be Small’s first as CFO.

“It’s no longer the Larry and Gary show,” said Kyle Sanders, an analyst at Edward Jones. “Martin will run the call and go over all the numbers with the analysts tomorrow. Anytime you have a new leader, you’re aware of a shift in tone, or maybe a hint that there might be a new strategic direction the firm can take. ยป

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However, Sanders doesn’t think that will happen. “BlackRock’s strategy has been pretty consistent over the last couple of decades,” he said. “I wouldn’t expect any changes, but just something to keep in mind and listen for as he goes through the conversation.”

One topic that will be top of mind for many listening is environmental, social and governance investing, known as ESG โ€“ and what CEO Larry Fink is saying or not saying about ESG investing, which has become an increasingly politically charged topic . The outspoken Fink’s support for tackling climate change has made the New York-based asset manager a target for conservatives.

Fink’s recent letter to investors shied away from ESG investing compared to his last annual letter. In fact, ESG did not appear anywhere in the letter. Rather, Fink said that “it is up to governments to make policy and pass legislation, and not for companies, including asset managers, to be the environmental police.”

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Although Fink did not mention ESG explicitly in the lengthy letter, he reiterated that “for years now we have viewed climate risk as an investment risk” and “changes in globalization, supply chains, geopolitics, inflation, monetary and fiscal policy, and climate can all affect a company’s ability to deliver lasting value.โ€

Sanders said he expects Fink to take “a much more balanced approach around ESG” on the call. “The last few conversations, he’s kind of backed up some of his claims around climate change. I think they’re really going tight-lipped on ESG right now, and they’re going to be a little more measured in how they talk about those types of products.”

BlackRock’s first-quarter earnings are expected to reflect a year of market turmoil, from the continuing war in Ukraine to rising inflation and aggressive rate hikes and, more recently, the regional banking crisis.

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Analysts polled by FactSet expect first-quarter earnings, reported under generally accepted accounting principles, to be $7.48 per share. Non-GAAP, or adjusted, earnings are estimated at $7.78 per share, compared to $9.52 per share a year ago, a drop of 18%.

Revenue and profit are also expected to be lower than a year ago, making it BlackRock’s fourth consecutive quarter of revenue and profit declines. Revenue is forecast at $4.25 billion with adjusted earnings, or net income, of $1.16 billion, according to FactSet. A year ago, BlackRock reported revenue of $4.69 billion and adjusted earnings of $1.46 billion.

Analysts will also closely monitor the firm’s long-term net inflows, which include equity and bond products, private equity and alternative investments, but not money market funds for cash management. Analysts tracked by FactSet expect quarterly long-term net inflows of $77.2 billion and total net inflows of $122.2 billion. In the first quarter of 2022, BlackRock reported $114 billion in quarterly long-term net inflows and $86 billion of total net inflows, mainly due to seasonal cash management outflows.

While earnings are expected to decline, there is one possible bright spot: investors pouring money into BlackRock’s bond exchange-traded funds thanks to higher interest rates.

“We think we’re at the beginning of the golden age of fixed income ETFs,” Sanders said. “We expect to see a lot of strength in fixed-income ETFs, and that momentum should continue over the next couple of years. We think the amount BlackRock has in iShares fixed-income ETFs is going to double over the next three years .โ€

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In a research note, Cathy Seifert, vice president at CFRA Research, said she maintains a strong buy rating on BlackRock shares and maintains a 12-month price target of $805 per share ahead of the earnings report.

BlackRock shares rose 0.5%, to $669.34, in recent trading. The


S&P 500

was up 1.3 percent.

Corrections and enhancements

Martin Small is BlackRock’s CFO. An earlier version of this article incorrectly identified him as Martin Snow.

Write to Lauren Foster at lauren.foster@barrons.com



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