3Q earning season is underway and so far results have been above expectations. Bellwether sector stocks have set a solid tone for financials, tech and healthcare stocks. The net result has been a series of top tier banks lifting their price target on BlackRock (NYSE:BLK), the financial behemoth.
Globally, financial sector stocks have entered a “goldilocks” environment. With accelerating growth, slowly increasing yields, and positive general economic outlook, investors have snapped up stocks in financials. While many have some competitive advantages, none possesses the unique revenue driving capability of BlackRock. The asset management giant, led by iShares franchise, has been perfectly positioned to hoover up unending demand for passive investment vehicle. In 3Q 17 BlackRock took in nearly $1.5bn a day, net inflows of ($96bn) with asset management just below $6trn (growth also supported by asset appreciation). In addition, Blackrock active funds took in nearly $6bn.
The surging business model is showing strong results across BlackRock's three main segments, which are retail, iShares, and institutional. BLK 3Q 17 reported, revenue growth 14%, to $3.23 billion, 10% rise in operating income while earnings of $5.92 per share beating last year $5.14 results by 9.87%. On a valuations basis, Price/Forecast Earnings stand at 21.42 marginally above S&P 500 20.11. BLK shares have increased 33% over the past years well above 19% rise for the broader markets. However, given macro-environment and product position, Blackrock is perfectly positioned for further revenue expansion.