BlackRock Results Boosted by Strong ETF Inflows

BlackRock Inc. BLK reported adjusted earnings of $6.24 per share in the fourth quarter of 2017, beating the Zacks Consensus Estimate of $6.08 and improving 21% from the year-ago quarter. Full-year adjusted earnings per share of $22.60 improved 17% year over year. It surpassed the Zacks Consensus Estimate of $22.47. A solid improvement in assets under management (AUM) seems to have spurred the earnings beat.

The company witnessed strong inflows during the quarter. ETF investors’ contributions were huge to take BlackRock’s assets under management to around $6.29 trillion at the end of fourth-quarter 2017 (up 22%), mainly due to soaring sales of its iShares exchange traded funds.

Since BlackRock issued the iShares core funds five years ago, there have been more than $275 billion of net inflows, including $122 billion of net inflows realized in 2017 alone and $55 billion was recorded in the fourth quarter (read: U.S. Listed ETFs Garner Record Inflows in 2017).

Revenues (GAAP basis) for the quarter came in at $3.47 billion, increasing 20% year over year. The rise was driven by higher investment advisory, administration fees and securities lending revenues, technology and risk management revenues, and investment advisory performance fees. The reported figure surpassed the Zacks Consensus Estimate of $3.35 billion.

For 2017, GAAP revenues were $12.49 billion, up 12% compared with the prior year. The reported figure also surpassed the Zacks Consensus Estimate of $12.37 billion.

What’s Behind Constant Success

The world's largest asset manager has been making a kill for the last few quarters thanks to strong ETF inflows. BlackRock slashed expense fees for some of its iShares ETFs in recent times. It is being said that the company took the step to provide tough competition to other low-cost players like Vanguard and Schwab (read: 10 Hottest ETF Themes for 2018).

For example, BlackRock lowered fees for its S&P 500 tracking ETF, iShares Core S&P 500 IVV, from 0.07% to 0.04%. The fee cut made IVV less expensive than another popular ETF – SPDR S&P 500 ETF SPY – in its domain. The fund charges 9 bps in fees. However, yet another S&P 500-based ETF, Vanguard S&P 500 ETF VOO, also charges 4 bps in fees (read: Buy These ETFs as BlackRock Cuts Fees).

ETFs in focus

Let’s take a look at Q4 inflows (as per etf.com) for some iShares ETFs that have undergone fee cuts in recent times.

iShares Core S&P 500 ETF IVV – $6.93 billion

iShares Core MSCI EAFE ETF IEFA – $4.40 billion

iShares Core MSCI Emerging Markets ETF IEMG – $3.17 billion

iShares Core U.S. Aggregate Bond ETF AGG – $2.83 billion

iShares Core S&P Total Stock Market ETF ITOT – $701.1 million

iShares Core S&P Small-Cap ETF IJR –  $1.26 billion                

iShares Core MSCI Total International Stock ETF IXUS –$662.9 million

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BlackRock, Inc. (BLK) : Free Stock Analysis Report
 
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ISHARS-SP SC600 (IJR): ETF Research Reports
 
VANGD-SP5 ETF (VOO): ETF Research Reports
 
ISHARS-SP500 (IVV): ETF Research Reports
 
ISHARS-CR US AG (AGG): ETF Research Reports
 
ISHARS-1500 IDX (ITOT): ETF Research Reports
 
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ISHARS-CR INT S (IXUS): ETF Research Reports
 
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