Investor willingness to put money into riskier securities pushed BlackRock Inc. (BLK) past analysts' expectations by nearly 18% with its fourth-quarter 2010 earnings report released Tuesday, which showed diluted earnings per share at $3.42 versus estimates of $2.90.
The world's largest asset manager broke its quarterly earnings record with the report, which showed profits skyrocketing 107% higher at $657 million, or $3.35 per share, compared with $256 million, or $1.62 per share, a year ago. Quarterly revenue was posted at $2.49 billion, up 61% from $1.54 billion a year earlier. Annual revenue was 157% higher.
Assets under management (AUM) totaled $3.561 trillion at Dec. 31, up $114.9 billion, or 3%, during the quarter.
"The increase in AUM was driven by market and investment performance of $132.1 billion and net new business of $23.9 billion, which were partially offset by merger-related outflows of $38.7 billion," the company reported in its earnings release. "A single index client accounted for $23.6 billion of the merger-related outflows, representing less than $1.5 million in annualized revenues. For the year, AUM rose $214.7 billion, or 6%, on the strength of $284.1 billion from market and investment performance and $57.8 billion of net new business, while merger-related outflows totaled $121.0 billion, or less than 7% of acquired AUM."
Analysts and the company say the results signal investors' renewed confidence in the stock market and increasing tendency to shy away from bonds. BlackRock's record results also reflect the firm's 2009 acquisition of Barclays Global Investors (BGI), a leader in index and exchange-traded funds.
"The numbers came in above expectations," said Stifel Nicolaus equity analyst J. Jeffrey Hopson. "As relevant is that the flows in the door are now moving toward higher-fee, higher-risk products for clients. It's a mix shift that's beneficial for BlackRock's bottom line. On both the retail and investment advisory side, they're really both the same in terms of what BlackRock is doing. Clients are becoming a little more aggressive with their own investments, and that move toward equities and credit and away from low-risk products such as Treasuries is benefiting BlackRock's top line and margins."
Chairman and Chief Executive Laurence Fink noted that BlackRock closed 2010 with strong earnings for both the quarter and the year due to attractive investment performance and growing new business momentum.
