Shares of BlackRock (NYSE:BLK) were rising on Friday, despite the fact that the world’s largest money manager missed revenue estimates in its first quarter.
With markets down 5% for the S&P 500 and 10% for the Nasdaq 100 in Q1, it was going to be a challenging quarter for BlackRock, as management fees are tied to asset levels.
But BlackRock got a significant lift from higher inflows into its funds and ETFs. The firm generated $84.2 billion in net inflows in the quarter, up from $57.2 billion in the same quarter a year ago.
While there was $37 billion in outflows from institutional funds, ETFs saw a huge surge with $107 billion in inflows in the quarter.
Fixed income accounted for about $38 billion of the inflows, while about $19 billion came into equities. Further, a robust $9.3 billion flowed in alternative funds, while $8.5 billion went into multi-asset funds and $5.1 billion flowed into commodities or cash.
The diversity of options, as well as BlackRock’s dominant leadership in the asset management space, allowed it to navigate a volatile environment. Total assets under management only dipped slightly to $11.55 trillion, from $11.58 trillion at the end of Q4.
“We’ve intentionally shaped our platform to serve clients in all market environments, building a premier global public-private markets investment and technology firm,” Chairman and CEO Laurence Fink said. “We have leading franchises in categories that we expect to benefit from capital flows and investment even against volatile public markets. These include our newly enriched private markets platform, ETFs, and Aladdin risk management and technology.”
Revenue Miss, Dividend Raise
The strong inflows helped Blackrock increase revenue by 12% in the quarter to about $5.28 billion. However, this did fall short of analysts’ expectations for $5.38 billion in revenue.
Still, Fink lauded the 6% organic base fee growth, calling it the best start to a year since 2021 against a “complex market backdrop.” Organic base fee growth rate is net new base fees earned on net asset inflows.
Net income was down about 4% to $1.51 billion, or $9.64 per share. But adjusted earnings were far better than expected, up 25% to $11.30 per share, when eliminating acquisition-related and other one-time expenses. That easily topped estimates of $10.21 per share.
BlackRock also boosted its dividend to $5.21 per share, up from $5.10 per share the previous quarter. That amounts to an annual payout of $20.84 per share. This marks the 16th straight year of dividend raises for BlackRock at a solid yield of 2.43%.
The organic fee growth, strong net inflows, and dividend raise, and earnings beat all likely contributed to BlackRock’s stock rising.
Investors may also see Blackrock enduring the worst of the volatility in the first half of the year. Markets could see potential gains in the second half of the year, albeit muted, to bring indexes back closer to flat. Fink said the firm is prepared to deal with it, as it did in Q1.
“Uncertainty and anxiety about the future of markets and the economy are dominating client conversations,” Fink said. “We’ve seen periods like this before when there were large, structural shifts in policy and markets – like the financial crisis, COVID, and surging inflation in 2022. We always stayed connected with clients, and some of BlackRock’s biggest leaps in growth followed.”
BlackRock has a consensus buy rating and a median price target of $1.046 per share, which would be a 21% gain. With a P/E down to 20, BlackRock looks like a decent deal right now.