BlackRock Earnings: Improved Flows and Market Gains Lift AUM to Record Levels

Key Morningstar Metrics for BlackRock

• Fair Value Estimate: $925.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: High

What We Thought of BlackRock’s Earnings

While there was little in BlackRock’s BLK third-quarter earnings that would alter our long-term view of the firm, we expect to increase our fair value estimate to $1,000 per share to account for revised near-term expectations for AUM, revenue, and profitability since our last update. Although the company continues to trade at a hefty premium relative to the other US-based traditional asset managers (which we feel is warranted), its shares trade near our revised fair value estimate.

BlackRock closed out September 2024 with a record $11.475 trillion in assets under management, up 7.8% sequentially and 26.1% year over year. This was comfortably above our forecast, as flows, foreign exchange, and market gains all came in higher than our expectations. Net long-term inflows of $160 billion were more than double what we forecast, as institutional investors returned to the market and the company booked stronger ETF flows than we expected. BlackRock’s annualized organic AUM growth rate was 6.5% during the third quarter, outside the upper end of our annual target of 3%-5%.

While average long-term AUM was up 17.8% year over year during the quarter, BlackRock reported a 9.5% increase in base fee revenue growth as product mix shift and changing fee rates led to a 7.1% year-over-year decline in the firm’s realization rate. Total revenue was up 14.9% during the third quarter and 11.4% in the year to date, leaving the firm well-positioned to meet our revised forecast for low-double-digit top-line growth in 2024. As for profitability, BlackRock posted a 180-basis-point year-over-year increase in year-to-date GAAP operating margins to 37.3%. On an adjusted basis, operating margins were 44.1% during the first nine months of the year, compared with 41.8% during the same period in 2023.