Results Beat market expectation
BlackRock, Inc. (NYSE: BLK) reported a 1% rise in revenues to $2.89 billion for the fourth quarter of 2016. The rise was due to an increase in all the components except investment advisory performance fees and distribution fees. Accordingly, BLK stock surged over 0.4% on January 13th, 2017 (Source: Google finance)
For the full year, BlackRock revenue was at $11.16 billion down 2% YoY. Total expenses were $1.67 billion, down 3.5% YoY. There was a decline in almost all the expense components except distribution and servicing costs. Non-operating expense was at $38 million as against a non-operating income of $11 million in the year-ago period. The adjusted operating income came in at $1.23 billion, up 8% YoY. The company has cut down its expenses and also has lower cost funds. BlackRock has reduced its headcount early in 2016.
Net profit was at $852 million for the quarter translating into $5.14 EPS for the quarter beating consensus estimate of $5.02. The net margin was at 28.59% and return on equity was at 11.04%. BlackRock full year adjusted earning were at $19.29 per share ahead of Zacks’s estimate of $19.21.
BlackRock has declared a quarterly dividend of $2.50 per share which is higher than its previous quarterly dividend of $2.29 per share. This represents a $10 dividend on annualized basis. BlackRock’s dividend payout ratio is 48.16%. The management said the company has hiked its dividend by 9% and also ramping up its share buyback program. The board has authorized additional 6 million worth of share repurchase under the existing share repurchase program.
Fund movement
Investors put in $88 billion into the company’s market tracking index investments and its iShare exchange traded funds during the quarter. Investors, however, pulled off $546 million from funds managed actively by portfolio managers. BlackRock’s large iShare franchise has helped because of its low cost of accessing the market through many index funds, which resulted into attracting $202 billion into its funds last year.
Outlook
Going forward, BlackRock is well positioned for opportunistic acquisitions. Company’s initiatives to gain market share in the ETF business would drive the revenue growth. The concern, however, is company’s high dependence on overseas revenues and regulatory restrictions on its revenue sources. Although BlackRock has managed to curtail costs but going forward, increase in regulatory compliance costs, compensation costs, as well as higher marketing costs, are expected to keep expenses high in near term.