The world’s largest money manager, BlackRock Inc. (BLK, Financial), announced its top and bottom line figures for the first quarter of the fiscal year 2015 that surpassed analyst expectations with respect to earnings, but fell short of their expectations in terms of revenue. In fact, investors sent shares of BlackRock down 1.2% to $372.18 soon after the earnings release. The strength of the dollar cut short the growth of revenue during the quarter.Â
Revenue falls short, but earnings outshine
The rise of the dollar by more than 19% in the past year has been squeezing the profits of the U.S. multinational companies, and BlackRock is also in that list. At BlackRock, the currency fluctuation affected the fees from clients paying in weaker foreign currencies during the quarter.
The rise of the dollar has led to a drop of $87.6 billion in assets in management during the quarter that was worse than the $63 billion reduction in assets in management in the fourth quarter of the previous fiscal year.
Driven by such negative currency rates, the revenue for the quarter fell below the Street estimates of $2.79 billion and stood at $2.72 billion. However, earnings were at $822 million, or $4.84 a share in the first quarter, from $756 million, or $4.40 a share, in the same period last year. Despite the revenue fall due to currency headwinds, the money manager was able to report an 8.7% rise in the first quarter profit, and this was chiefly attributed to the positive flows into its exchange-traded funds. The earnings for the quarter easily surpassed the analysts’ estimates of $4.52 a share.
Founder and CEO Laurence Fink stated in an interview with CNBC- “The number one story is the breadth of the flows. We had $70 billion in net long-term flows…” Net inflows during the quarter totaled $68.7 billion, as investors poured $35.48 billion into the company’s ETFs, with the lion share invested in fixed income funds. It is notable that in spite of dollar rate fluctuations, the asset under management rose to $4.8 trillion, from $4.4 trillion in the same quarter a year earlier.
Share repurchases continue
Irrespective of the loss in revenue during the quarter, the company actively repurchased shares of worth $275 million in the reported quarter. This directly reflects the aim to keep the investors invested in the stock.
During the quarter, the cash dividend improved 13% to $2.18 per share. The management shared – “We are confident that our platform, our distribution, our client relationships and our long-term focus position BlackRock to continue to execute on behalf of clients in an ever-changing investment landscape. I would like to once again express my gratitude to BlackRock employees for their commitment to excellence. Together, we look forward to continuing to drive results for our clients and shareholders…”
Last word
BlackRock has improved its assets under management in the presence of major currency headwinds which means that the management has solid strategies in place to take care of factors which might offset the normal growth projected by the company in the long run. In fact, with the “dangerous imbalance” across the financial system as bond holders are trying to hunt for the best fund choices in the prevailing low interest rate environment, BlackRock’s CEO has warned investors to invest cautiously in fixed-income products. Nevertheless, BlackRock did perform at its best in the first quarter of this fiscal year.
