BlackRock reported Q4 2012 and full year results on January
17th, 2013. Q4 EPS of $3.96 beat analyst estimates of $3.70 by
$0.26. The strong quarter and the beat was driven by assets under management
(AUM) expansion in fixed income products and ETFs. ETF consumers positively
reacted to BlackRock’s first ever TV marketing campaign during the quarter. AUM
inflows were strong from both institutional and retail investors.
Many of BlackRock’s goals came together during the quarter
including an operating margin of 42.6% a notable improvement over Q3’s 40.7%
operating margin and a year prior’s 40.0% operating margin. BlackRock’s ability
to increase assets and keep the operating margin high during the quarter is a
true sign that their business model works. This sent BlackRock’s shares up 4.39%
on the day.
The announced acquisition of Credit Suisse’s Swiss Re will
improve BlackRock’s already dominate ETF market share in Europe, in particular
the Swiss marketplace. BlackRock outbid rival State Street for the Credit
Suisse’s ETF arm helping BlackRock maintain their territorial advantage in the
region. This will be a key catalyst for ETF AUM in the quarters ahead.
Improved revenue and AUM inflows from every unit helped
justify an increased price target for BlackRock. The previous price target of
$232.00 was broken today with the earnings jump, however after readjusting the
model a $253.25 price target will be assigned due to improved valuation. This
represents an additional 9.1% upside from the current price.
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