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Headlines:
- Current Performance: BlackRock's stock has gained 4% YTD, lagging behind the S&P 500's 17% rise.
- Historical Comparison: BLK's gains have been inconsistent compared to the S&P 500 over the past three years.
- Future Outlook: BlackRock's revenue and earnings are projected to rise in 2024, with a valuation estimate of $938.
BlackRock’s stock (NYSE:BLK) has seen an increase of approximately 4% year-to-date, falling short of the S&P 500’s 17% gain over the same timeframe. In comparison, State Street’s stock (NYSE:STT), a peer of BlackRock, has risen 10% year-to-date. Currently priced at $845 per share, BLK is trading 10% below its fair value of $938, as estimated by Trefis.
Despite a 15% rise from early January 2021 levels of $720 to its current price of $845, BlackRock’s performance lags behind the S&P 500’s 50% increase over this nearly three-year period. The stock’s performance has been variable: 27% growth in 2021, a 23% decline in 2022, and a 15% rise in 2023. In contrast, the S&P 500 experienced similar returns of 27% in 2021, a 19% decline in 2022, and a 24% gain in 2023, indicating BlackRock's underperformance in recent years.
Beating the S&P 500 consistently has proven challenging for individual stocks and major financial sector players like JPMorgan, Visa, and Mastercard, as well as tech giants like Google, Tesla, and Microsoft. However, the Trefis High Quality (HQ) Portfolio, comprising 30 selected stocks, has consistently outperformed the S&P 500 annually. This is attributed to HQ Portfolio stocks offering better returns with less volatility compared to the benchmark.
In the context of the current macroeconomic environment, characterized by high oil prices and elevated interest rates, BlackRock might face a similar underperformance to that seen in 2022 and 2023. The company’s second-quarter 2024 results were mixed: earnings surpassed expectations, but revenue fell short. BlackRock reported total revenues of $4.81 billion, up 8% year-over-year, driven by a 7% increase in base fees, higher performance fees, and greater technology services revenue. Assets under management rose 14% year-over-year to $10.46 trillion, bolstered by steady organic growth and favorable market conditions. On the cost front, operating expenses as a percentage of revenue decreased, resulting in an operating margin of 37.5%, up from 36.2%. Net income climbed 9% year-over-year to $1.5 billion.
For FY 2023, top-line revenue slightly decreased to $17.86 billion due to reduced distribution and base fees, despite increased technology services revenue. Operating expenses as a percentage of revenue saw a minor increase but were offset by improved non-operating income, which surged from -$95 million to $880 million. Consequently, adjusted net income grew 6% year-over-year to $5.5 billion.
