BlackRock’s stock (NYSE: BLK) has gained roughly 4% year-to-date (YTD) compared to the 17% rise in the S&P 500 index over the same period. BlackRock peer State Street’s stock (NYSE: STT) is up 10% YTD. At its current price of $845 per share, BLK stock is trading 10% below its fair value of $938, as estimated by Trefis. Despite a 15% increase in BLK stock from early January 2021 to now, it has not been consistent, with returns of 27% in 2021, -23% in 2022, and 15% in 2023. In comparison, the S&P 500 had returns of 27% in 2021, -19% in 2022, and 24% in 2023. The Trefis High Quality Portfolio has outperformed the S&P 500 each year over the same period, suggesting that HQ Portfolio stocks provided better returns with less risk.
In the second quarter of 2024, BlackRock posted mixed results, with earnings beating the consensus but revenues missing the mark. Total revenues stood at $4.81 billion, up 8% year-over-year (y-o-y) driven by a 7% growth in base fees, higher performance fees, and technology services revenue. Average assets under management increased 14% y-o-y to $10.46 trillion, thanks to consistent organic growth and positive market movements. Operating expenses as a % of revenues decreased, leading to an operating margin of 37.5% vs. 36.2%. Net income rose by 9% y-o-y to $1.5 billion. In FY 2023, BlackRock reported slightly decreased total revenues of $17.86 billion, with a drop in distribution fees and base fees being offset by an increase in technology services revenue. Adjusted net income grew 6% y-o-y to $5.5 billion.
Moving forward, BlackRock is expected to continue this trend in Q3 2024, with forecasted revenues reaching $20.04 billion in FY 2024. The adjusted net income margin is expected to see a slight drop, resulting in an annual GAAP EPS of $40.18. With a P/E multiple just above 23x, this would lead to a valuation of $938 for BLK stock. Despite recent underperformance compared to the S&P 500 in 2022 and 2023, BlackRock’s solid financials and market position suggest potential for growth in the future. However, uncertainties in the macroeconomic environment, such as high oil prices and elevated interest rates, could impact BLK’s performance in the next 12 months.
Investors looking to beat the market may consider investing with Trefis Market Beating Portfolios, which have outperformed the S&P 500 consistently. As individual stocks, including heavyweights in the Financials sector and megacap stars, have struggled to consistently beat the S&P 500 in recent years, a diversified portfolio like the Trefis High Quality Portfolio may offer better returns with less risk. The performance metrics of the HQ Portfolio reflect a smoother ride compared to individual stock performances. With a focus on quality stocks and potential for steady growth, Trefis Market Beating Portfolios present an attractive option for investors looking to achieve above-market returns with reduced risk.
