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Is an Earnings Beat Likely for BlackRock (BLK) Stock in Q4?


We expect BlackRock, Inc. BLK to beat earnings expectations when it reports its fourth-quarter and full-year 2016 results on Friday, Jan 13, before the opening bell.

This New York-based asset manager’s earnings surpassed the Zacks Consensus Estimate last quarter. Lower expenses and a rise in assets under management helped counter the revenue decline.

Shares of BlackRock have gained nearly 5% during the fourth quarter thanks to the Trump rally. Investors also seem optimistic about the company’s near term prospects. However, the company does not have a decent earnings surprise history, as evident from the chart below:

BlackRock, Inc. Price and EPS Surprise

BlackRock, Inc. Price and EPS Surprise | BlackRock, Inc. Quote

Why a Likely Positive Surprise?

Before we go into a detailed discussion about the factors that are likely to influence the results, let’s check what our quantitative model predicts.

Our quantitative model predicts that an earnings beat is quite likely. Here is what it indicates.

Chances of BlackRock beating the Zacks Consensus Estimate in the fourth quarter are high. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #3 (Hold) or better for this to happen.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The Earnings ESP for BlackRock is +0.20%. This is because the Most Accurate estimate of $5.04 is above the Zacks Consensus Estimate of $5.03.

Zacks Rank: BlackRock currently carries a Zacks Rank #3. This further increases the chances of an earnings beat.

Moreover, the earnings estimate of $5.03 for the upcoming release indicates a year-over-year rise of nearly 6%. Nevertheless, the Zacks Consensus Estimate for BlackRock for the fourth quarter has been witnessing downward revisions, over the last 30 days.

Factors to Impact Q4 Results

Though BlackRock continues dominating the ETF market with its brand initiatives for the iShares and ETF business, macroeconomic factors may adversely impact the company’s results.

Since the beginning of 2016, lower revenues remained a concern for the company. Revenue growth is likely to remain challenging in the fourth quarter, because of expectations of poor performance fees and strengthening of the U.S. dollar.

Also, BlackRock’s reduction of the prices of some U.S. iShares for ETFs and several actively managed U.S. bond funds is likely to negatively impact revenues. Further, this is expected to put pressure on margins during the quarter.

Nevertheless, the company’s continued focus on its iShares and ETF business might provide some support to the top line.

Further, expenses are likely to be on the lower side during the quarter. Notably, the company expects G&A expenses to be slightly lower on a year-over-year basis, after making adjustments for the quarterly deal related expenses of $23 million, incurred in 2015.

Other Stocks Worth a Look

Here are a few finance stocks worth considering as they also have the right combination of elements to post an earnings beat in their upcoming releases.

Citigroup Inc. C is slated to release results on Jan 18. It has an Earnings ESP of +3.60% and carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BB&T Corporation BBT is scheduled to report results on Jan 19. It has an Earnings ESP of +1.37% and carries a Zacks Rank #2.

Fifth Third Bancorp FITB has an Earnings ESP of +2.33% and carries a Zacks Rank #2. The company is slated to release results on Jan 24.

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