Tuesday, January 22, 2013
Investing in Financial Asset Management
Zacks Investment Research reports BlackRock Inc. (BLK) announced impressive fourth-quarter results last week, including a hike in its quarterly cash dividend. This Zacks Rank #2 (Buy) asset management company hit a 52-week high on the day of the report. It currently pays a regular quarterly dividend that yields 2.6% annually.
With a solid dividend yield and an expected long-term earnings growth rate of 12.2%, BlackRock looks like a promising pick for investors seeking both growth and income.
Solid Q4 Results
On Jan 17, 2013, BlackRock announced fourth-quarter adjusted earnings of $3.96 per share, topping the Zacks Consensus Estimate by 5.9% and the year-ago earnings by 29.4%. The improvement was primarily attributable to an increased top line, partly offset by higher operating expenses.
BlackRock’s total revenue was $2.54 billion, up 14.0% from the prior-year quarter. Total revenue was also ahead of the Zacks Consensus Estimate of $2.48 billion. Total expenses increased 8.1% to $1.53 billion, mainly due to higher employee compensation and benefits, direct fund expenses, as well as general and administration expenses. AUM totaled $3.79 trillion as of Dec 31, 2012, rising 7.9% from the year-ago period. Moreover, total long-term inflows for the quarter climbed 3.1% to $3.48 trillion.
Earnings Estimates Advancing
The Zacks Consensus Estimate for 2013 is $15.26 per share, which is up 2% in 30 days and 1.2% in just the past 7 days. Meanwhile, the Zacks Consensus Estimate for 2014 is $17.06, up 2.6% in a month and 1.8% in the past week.
In January 2013, BlackRock announced a 12% hike in its quarterly cash dividend to $1.68 per share. The dividend will be paid on Mar 25, 2013 to shareholders at the close of business on Mar 7, 2013. This dividend rate affirms an annual yield of 2.6%.
Shares of BlackRock currently trade at 15.3x 12-month forward earnings, a 30.8% premium to the peer group average of 11.7x. Its price-to-book ratio of 1.6 is 45.5% above the industry median of 1.1. Given its strong fundamentals, the valuation looks reasonable.
The company has a trailing 12-month ROE of 9.7%, compared with the peer group average of 9.0%. This implies that the company reinvests its earnings more efficiently than its peers.
BlackRock has been continuously outperforming the S&P 500, as well as the 200 and 50 day moving averages over the last three months. The stock has returned 30.3% over the past year, compared with the S&P 500’s return of 13.0%.
Headquartered in New York, BlackRock Inc. is one of the world’s largest publicly-traded investment management firms. The company offers products that span the risk spectrum, including active, enhanced and index strategies. The company also provides risk management as well as advisory and enterprise investment system services. Founded in 1988, BlackRock has a market cap of nearly $39.7 billion. Lazard Ltd. (LAZ) and Affiliated Managers Group Inc. (AMG) are the other Zacks Rank #2 (Buy) stocks in the industry.
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