Key Points
BlackRock delivered mixed earnings, leading to a sell-off.
However, the bottom-line beat means shareholders shouldn’t worry.
Chalk today’s decline up to a routine round of profit-taking after a big recent run.
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Shares of BlackRock (NYSE: BLK), the world’s largest asset manager, fell 5.4% on Tuesday as of 3 p.m. ET.
BlackRock reported earnings that actually beat on the bottom line, but missed on the top line. With a somewhat full valuation and investors wary of how fast the world’s largest asset manager can grow with markets at all-time highs, the stock shed some recent gains.
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A mixed quarter isn’t good enough for Wall Street’s expectations
In the second quarter, BlackRock grew revenue 12.7% to $5.42 billion, while adjusted non-GAAP (generally accepted accounting principles) earnings per share grew 16.3% to $12.05. That top-line number actually missed expectations, but the bottom-line figure handily beat expectations by $1.23.
The culprit behind the miss on revenues was a single institutional client that redeemed $52 billion on lower-fee indexes. That redemption led to lower-than-expected net inflows of $68 billion; however, as the redemption was of relatively low-fee indexes, BlackRock was still able to maintain strong profit growth.
Solid growth was also expected, too, because of BlackRock’s $12.5 billion acquisition of Global Infrastructure Partners, which closed in October 2024.
Image source: Getty Images.
Nothing except profit-taking
Today’s sell-off likely has more to do with profit-taking following the stock’s near-40% recovery off of April’s lows than anything else. BlackRock shares also came into the day trading around 27 times earnings, while paying a dividend yield just under 2%.
That’s not terribly expensive for a really high-quality growth company, although it’s not especially cheap for a financial stock. Therefore, long-term investors in BlackRock stock should continue to hold, though those who don’t would probably do well to wait for more market-related fear and a lower valuation to enter.
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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
