BlackRock Inc. (BLK)

BlackRock Inc. (BLK)

Updated April 16th, 2019 by Kay Ng

Key Metrics

Current Price:

$467

Fair Value Price: $436

% Fair Value:

107%

Dividend Yield:

2.8%

Dividend Risk Score: C

5 Year CAGR Estimate: 5 Year Growth Estimate: 5 Year Valuation Multiple Estimate: 5 Year Price Target Retirement Suitability Score:

9.4% 8.0% -1.4% $641 C

Volatility Percentile: 38.0%

Momentum Percentile: 22.6%

Growth Percentile:

75.8%

Valuation Percentile: 42.3%

Total Return Percentile: 55.7%

Overview & Current Events

BlackRock is a large investment and asset management firm. It was founded in 1988 and today has about $6.5 trillion of assets under management. BlackRock provides investment management, risk management, and advisory services for institutional and retail clients worldwide. Its products include single and multi-asset class portfolios, equities, fixed income, alternative investments, and money market instruments. Around 80% of BlackRock's revenue is derived from investment advisory, administration fees, and securities lending, while the remainder is generated from performance fees, distribution fees, and technology services revenue.

In mid-April, BlackRock announced (4/16/2019) its first-quarter results. Revenue of $3.35 billion declined 6.6% from the same quarter last year. Adjusted earnings-per-share of $6.61 declined by 1.3%. BlackRock's broad investment platform generated $65 billion of net fund inflows for the quarter, which represented 4% organic growth and an increase of 13.6% compared to the same quarter last year.

Aladdin is BlackRock's investment platform that helps investment managers make informed decisions. In March, BlackRock announced it will acquire eFront, the world's leading alternative investment management software and solutions provider, which is expected to strengthen Aladdin's alternative and multi-asset capabilities.

Year EPS DPS Shares

2009 $6.11 $3.12 188.8

2010 $10.55 $4.00 191.2

2011 $12.37 $5.50 178.3

Growth on a Per-Share Basis

2012 2013 2014 2015 2016 $13.79 $16.87 $19.29 $19.79 $19.04 $6.00 $6.72 $7.72 $8.72 $9.16 171.2 168.7 166.9 163.5 161.5

2017 $22.49 $10.00 160.0

2018 $26.93 $12.02 160.0

2019 $29.08 $13.20 160.0

2024 $42.73 $19.40 160.0

As you can see in the above table, BlackRock has done an excellent job growing earnings-per-share over the past 10 years. This growth was due to two key factors. First, the nearly uninterrupted bull market of the past decade has fueled greater investor confidence and higher investment activity. Second, BlackRock helped pioneer the exchange-traded-fund revolution. Over the past several years, investors have gravitated funds toward low-cost ETFs. BlackRock operates the iShares brand, which has seen strong growth from this new trend. This has allowed BlackRock to attract new clients and strong fund inflows, at the expense of traditional, higher-priced mutual funds offered by its competitors. We continue to expect 8% annual EPS growth over the next five years.

Valuation Analysis

Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Now 2024

Avg. P/E 28.2 17.2 14.5 13.5 16.0 16.6 17.5 18.3 18.7 18.3 16.1 15 Avg. Yld. 1.8% 2.2% 3.1% 3.2% 2.5% 2.4% 2.5% 2.6% 2.4% 2.4% 2.8% 3.0%

BlackRock shares currently trade for a price-to-earnings ratio of 16.1, based on expected EPS for 2019. In the past 10 years, BlackRock shares have traded for an average price-to-earnings ratio of 19.2. Due to a slower projected growth rate versus the last decade, our fair value estimate has been revised to a price-to-earnings ratio of 15. So, BlackRock shares appear to be slightly overvalued today.

Disclosure: This analyst has no position in the security discussed in this research report, and no plans to initiate one in the next 72 hours.

BlackRock Inc. (BLK)

Year Payout

Updated April 16th, 2019 by Kay Ng

Safety, Quality, Competitive Advantage, & Recession Resiliency

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 51.1% 37.9% 44.5% 43.5% 39.8% 40.0% 44.1% 48.1% 44.5% 44.6% 45.4%

2024 45.4%

BlackRock has a strong business model. It remained highly profitable during the last recession and continued to pay dividends in the Great Recession. It also has a safe dividend with room for continued dividend growth. The company generates more than enough cash flow to satisfy its debt obligations and reward shareholders with dividends. BlackRock last increased its dividend by 5% on January 16th, while its dividend per share over the last 12 months was 19.8% higher than it was in the previous year. The payout ratio of below 50% means the current dividend is secure, and the company should continue to raise its dividend near its earnings growth rate.

The main competitive advantage for BlackRock is its size, which is powerful when combined with a leading brand in the investment management industry. Many of its products, such as the iShares line of ETFs, are very popular for their low fees. That said, the company would likely suffer during a recession. Typically, economic downturns are accompanied by falling equity markets, which could lead to fund outflows. Investors should expect the next recession to negatively impact BlackRock's bottom line. With that said, the dividend should be safe even during a recession thanks to Blackrock's reasonable payout ratio. The company paid steady or rising dividends through The Great Recession.

Final Thoughts & Recommendation

When investors think of investing in the financial sector, bank stocks or insurance stocks typically come to mind. However, investors should not forget about investment managers. BlackRock is a high-quality company due to its leadership position in the industry. The company is enjoying rapid growth thanks to rising markets and its popular ETF product line. BlackRock has a decent dividend yield of 2.8% and a fair valuation. We expect total annual returns of 9.4%. Therefore, we think BlackRock is currently a "hold".

Total Return Breakdown by Year

BlackRock Inc. (BLK): Total Return Decomposition

100% 81.0%

80%

60%

56.3%

40% 20%

0% -20% -40%

2013

15.4%

9.4%

2014

-2.3%

-12.3%

-21.2%

2015 Total Return

2016

2017

2018

Dividend Return Price Change

Sure Analysis Estimates

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Disclosure: This analyst has no position in the security discussed in this research report, and no plans to initiate one in the next 72 hours.

BlackRock Inc. (BLK)

Year Revenue Gross Profit Gross Margin SG&A Expense D&A Expense Operating Profit Operating Margin Net Profit Net Margin Free Cash Flow Income Taxes

2008 5064 4473 88.3% 2566 236 1631 32.2% 784 15.5% 1780 387

Updated April 16th, 2019 by Kay Ng

Income Statement Metrics

2009 2010 2011 2012 2013 4700 8612 9081 9337 10180 4223 4512 4852 5040 5558 89.9% 52.4% 53.4% 54.0% 54.6% 2676 1354 1415 1359 1540 239 310 299 295 291 1300 2998 3281 3524 3857 27.7% 34.8% 36.1% 37.7% 37.9% 875 2063 2337 2458 2932 18.6% 24.0% 25.7% 26.3% 28.8% 1332 2357 2579 2090 3548 375 971 796 1030 1022

2014 11081 6084 54.9% 1453

278 4474 40.4% 3294 29.7% 3021 1131

2015 11401 6172 54.1% 1380

295 4664 40.9% 3345 29.3% 2783 1250

2016 11155 6046 54.2% 1301

263 4646 41.6% 3172 28.4% 2035 1290

2017 12491 6823 54.6% 1462

240 5272 42.2% 4970 39.8% 3673 270

Year Total Assets ($B) Cash & Equivalents Accounts Receivable Goodwill & Int. ($B) Total Liabilities ($B) Accounts Payable Long-Term Debt Total Equity ($B)

D/E Ratio

2008 19.92 2032 901 11.97 7.36 545 1142 12.07 0.09

Balance Sheet Metrics

2009 2010 2011 2012 2013 178.12 178.46 179.90 200.45 219.87 4708 3460 3560 4903 4551 1718 2095 1960 2250 2247 30.35 30.32 30.15 30.31 30.48 153.52 152.13 154.63 174.87 193.26

840 1068 923 1055 1084 5668 4637 6364 8189 7308 24.33 26.09 25.05 25.40 26.46 0.23 0.18 0.25 0.32 0.28

2014 239.79 6001 2120 30.31 212.31 1035 8311 27.37 0.30

2015 225.26 6231 2237 30.50 196.68 1068 4930 28.50 0.17

2016 220.18 6175 2115 30.48 191.03

880 4915 29.10 0.17

2017 220.22 7038 2699 30.61 188.34 1161 5014 31.83 0.16

Profitability Metrics

Year

2008 2009 2010 2011 2012 2013 2014

Return on Assets 3.7% 0.9% 1.2% 1.3% 1.3% 1.4% 1.4%

Return on Equity 6.6% 4.8% 8.2% 9.1% 9.7% 11.3% 12.2%

ROIC

5.8% 4.0% 6.7% 7.5% 7.5% 8.7% 9.4%

Revenue/Share 38.55 33.70 44.69 48.53 52.45 58.56 64.76

FCF/Share

13.55 9.55 12.23 13.78 11.74 20.41 17.66

Note: All figures in millions of U.S. Dollars unless per share or indicated otherwise.

2015 1.4% 12.0% 9.7% 67.45 16.46

2016 1.4% 11.0% 9.4% 66.96 12.22

2017 2.3% 16.3% 14.0% 75.97 22.34

Disclaimer

Nothing presented herein is, or is intended to constitute, specific investment advice. Nothing in this research report should be construed as a recommendation to follow any investment strategy or allocation. Any forward-looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. While Sure Dividend has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability or completeness of third-party information presented herein. No guarantee of investment performance is being provided and no inference to the contrary should be made. There is a risk of loss from an investment in marketable securities. Past performance is not a guarantee of future performance.

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