BlackRock Reported Diluted EPS of $3.10 for Q2 2012, this beat analysts’ estimates of $3.01. On a diluted basis our EPS estimate was $3.31 for Q2 2012, compared to $3.08 a 7% miss. BlackRock reported Q2 2012 revenue of $2,229 Million, 8% below our estimates. This was driven by weaker assets under management in both equities and alternatives; this was partially off-set by better performance in fixed income and alternatives. ETF’s gained revenue share since the previous quarter and now make up 20% of AUM, a 3% increase since the quarter prior. Assets under management had slight out flows and ended the quarter at $3.560 Trillion, a 3% decline since the end of the first quarter. BlackRock’s ETF units had a positive quarter of inflows, but were these gains were offset by valuation declines.
Overall BlackRock had a
quarter that beat estimates because this quarter’s fees were based strong first
quarter results. Going forward BlackRock’s results will be highly dependent on
market conditions. Fees for Q3 could be weaker due to a slimmer quarter of
performance during Q2. For this reason our expectations for Q3 are slightly
lower, but we expect improved operating margin driven by sustained lower
compensation. BlackRock kept compensation and cost basis low as costs declined
year over year Compensation was for Q2 2012 this was 35.3% of revenues,
improves from last quarter’s 36.7%.
Slightly declining assets under management caused a 5% year over year
decline in revenues and were the main driver for lower EPS than our
expectations. Specifically better Fixed Income inflows drove results to beat
analyst’s estimates, a trend that we expect to continue to drive strong
performance and inflows over the next two quarters. The quarter was neutral overall as management looked to next quarter they hope to continue performance by feeling the full benefits of recent acquisitions and an improved institutional investment outlook.