BlackRock (BLK) needs to keep beating the street if its going to keep growing like it has. Through three-quarters, analysts expect BlackRock to grow profits 16% in this year. That’s down from the 21% it experienced in 2013, but still shows solid growth.
When I updated my data on BLK last week, the thing that stood out most is profit growth is expected to be in a range of -3% to 5% the next four quarters. For 2015 analysts peg profit growth to be only 7%.
The company is going to have to do better if the stock’s going to go up, in my opinion. And honestly, I think it will. Four quarters ago the 2014 estimate was $18.40 and now its $19.21. That’s four percent higher, with one-quarter to play. Still, I think BLK needs to do more.
One Year Chart
BLK’s P/E is 15, which is equal to the three-to-five year Estimated Long Term Growth Rate (that’s earnings growth). The company also pays a dividend of around 2-3% per year, so I feel there’s a little upside here.
But notice how Estimates are in red. 1% profit growth is expected the next two quarters. Does that mean the smart minds think the equity market won’t be up a whole lot next year? If BLK beats by the same amount it did last quarter, profit growth will be just 7% next quarter. I think investors want more. Also, NxtQtr’s estimates just got slashed. From +4% to -3%.
Fair Value
Right now I think BLK’s worth 16 times earnings. Normally I would say its worth 18x but with slow-growth expected, I dont’ see thee stock getting a bigger P/E than it has now.
Sharek’s Take
One thing I didn’t mention above is BlackRock had $11 billion in investors inflow going into its bond products last quarter. The company makes most of its money of stock/equity investments, and if funds flow internally from stocks into bonds it means lower fees. Maybe that’s the reason 2015 estimates just came down 4%. Either way, the company needs to keep beating the street — and at an accelerating rate — if its going to match 2014’s success.
This is a good buy-and-hold stock, but I’m going to keep BLK on the radar for now. If you’re a long-term investor who bought BLK at a lower price, just wait it out. If you’re looking to make money now there are better choices.
View the Earnings Table here. View the Profit History here.View the Ten Year Chart here.
