Stock Watch: BlackRock (BLK) looks set to beat short-term challenges

BlackRock, Inc. (NYSE: BLK), the largest asset management company in the world, achieved significant growth over the years through measures like technology-enabled risk management and strategic acquisitions. After spreading its wings across the U.S, which accounts for the lion’s share of the business, the company is currently looking to expand to other geographies like Europe and Asia.

BLK is considered an expensive stock, but the company’s robust financial position and market-leading performance justify the high valuation. The good news is that the price is at a historic low now, after falling constantly since the beginning of the year. In what could be a sign of regaining momentum, the stock made modest gains this week but traded sharply below its November peak. BlackRock has a history of bouncing back from setbacks with extra vigor, a trait that made it a favorite among the investment community.

Dividend Power

The New York-based investment advisor’s track record in dividend distribution is equally impressive, with the yield rising to 3.4% after regular hikes. Long-term and retirement investors consider it a safe bet, and so do most experts who follow the stock. If their bullish recommendations and target price are any indication, BlackRock is a must-own stock. Interestingly, it is currently trading at a discount to the broader market.

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BlackRock’s Q1 2022 Earnings Call Transcript

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The sheer size and scale of the business enable the company to overcome short-term challenges effectively. iShares, a collection of exchange-traded funds managed by BlackRock, leads in that segment of the market with a share of more than 35%.

Q2 Results on Tap

BlackRock will be publishing its second-quarter results on July 15 before the market opens, amid estimates for a 15% decrease in net earnings to $8.54 per share. Nevertheless, experts predict that the top line would remain broadly unchanged at $4.8 billion.

From BlackRock’s Q2 2022 earnings conference call:

“Our investments are closely aligned with our strategy to keep alpha at the heart of BlackRock, accelerated growth in iShares, in private markets and Aladdin, deliver whole portfolio advice and solutions to our clients, and be the global leader in sustainable investing. Our clients are trying to understand the implications of the rapidly changing investment environment. The Russian invasion of Ukraine marks the profound geopolitical shift that is accelerating a reassessment of global supply chains.“

Key Numbers

In the March quarter, total revenues increased 7% from last year to $4.7 billion, which translated into an 18% growth in adjusted earnings to $9.52 per share. Long-term net flows came in at $114 billion, reflecting positive flows across all product types, investment styles, and regions. The bottom line has topped estimates in every quarter over the past three years.

Though the worst seems to be over for BlackRock, in terms of stock performance, it is unlikely to stay fully immune to the near-term uncertainties facing financial markets — with elevated inflation, interest rate hikes, and recession fears adding to the trouble. Also, the nature of BlackRock’s business is such that it is typically influenced by general market trends.

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Bank earnings give mixed cues amid rate hike concerns and inflationary pressures

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BlackRock’s performance in the stock market was in line with the broad market so far this year, marked by high volatility and a persistent downtrend. BLK traded slightly above the $620-mark on Thursday, after opening the session higher.