BlackRock Inc. on Wednesday, July 21, reported second-quarter 2010 net income of $432 million, up $214 million from a year ago and up $9 million from the first quarter. The results, which incorporated the $13 billion acquisition of Barclays Global Investors, beat analysts' expectations.
The money management giant's second-quarter profits came in at $2.21 a share compared to $1.59 a year ago. Analysts' consensus was for EPS of $2.29. Excluding acquisition-related costs and employee compensation, net income was $2.37 per diluted common share, at $463 million, up 35% compared to second-quarter 2009 diluted EPS of $1.75 but down $0.03 compared to first-quarter 2010.
Despite the doubling of income BlackRock (BLK) shares fell in trading, to as low as $141.01 a share after opening at $149.99, on market concerns about client outflows and the trend toward passively managed low-free products such as exchange-traded funds. The stock has fallen 36% this year.
"Market conditions were difficult, but overall investment performance remained strong and clients continued to award us new business in a wide variety of products," said BlackRock Chairman and CEO Laurence Fink in the second-quarter 2010 earnings release. "Going into the merger, we knew that some clients would have to address concentration issues and that the active quantitative style was under stress industry-wide. As expected, these two issues continued to drive outflows, and are expected to do so for at least another quarter."
BlackRock's board of directors approved the repurchase of up to 5.1 million shares "to neutralize the dilutive effects of restricted stock units and options that have been granted to employees and which will become dilutive over the next several years," according to the release.
In a report titled, "Decent Quarter and Pipeline, But Outflows Continue," equity research analyst Michael Carrier of Deutsche Bank maintained his hold rating on BLK shares.
"While BLK remains well positioned long term with a healthy pipeline ($60B), given the attrition outflows, more modest organic growth, and limited margin expansion in the near term, we remain at Hold," Carrier wrote.
