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BlackRock's Q2 2022 Earnings: A Mixed Bag Amidst Challenges
BlackRock, the world's leading asset manager, recently shared its financial results for the second quarter, which ended on June 30. Despite a strong performance in several areas, the company experienced an earnings miss—its first in the last 10 quarters.
The primary contributor to this miss was a $52 billion redemption by a single institutional client from a fixed income fund. This temporary setback in asset inflows and revenue generation from fees tied to assets under management (AUM) caused the company to narrowly miss revenue expectations, despite solid earnings growth and robust long-term asset growth trends.
BlackRock recorded $4.5 billion in revenue in Q2, a 6.1% decline over the year-ago period. This figure came in well below the average analyst prediction of $7.94 for the quarter. However, revenues grew 12.5% year-over-year to $5.42 billion, indicating a positive trend despite the miss.
The company's non-GAAP (adjusted) diluted earnings per share (EPS) slumped 29.6% year over year to $7.36, marking another area where the results fell short of expectations. This figure, too, was lower than the average analyst prediction of $7.94 for the quarter.
Despite these challenges, BlackRock's dividend payout ratio is projected to be 58% in 2022, with the dividend growth expected to be 6% to 7% annually for the foreseeable future. This dividend payout still leaves capital for debt reduction, share repurchases, and business expansion/acquisitions. BlackRock's dividend yield is nearly double the S&P 500's at 3%, making it an attractive proposition for long-term investors.
The financial markets' recovery is expected to boost BlackRock's total revenue and adjusted diluted EPS. This was only partially offset by a 0.9% decline in the company's outstanding share count to 151 million. BlackRock's average AUM were an unparalleled $9.3 trillion for the period, representing a 3.2% year-over-year decline in average AUM.
However, the company experienced $90 billion of net capital inflows during the second quarter, demonstrating its continued appeal to investors. Despite expenses falling more slowly than total revenue, BlackRock's non-GAAP net margin plummeted 870 basis points year over year to 24.8% in the second quarter.
In conclusion, while BlackRock faced significant challenges in Q2 2022, the company's long-term prospects remain strong. The financial markets' recovery, combined with BlackRock's robust asset growth trends and attractive dividend yield, make it an appealing investment option for long-term investors.
[1] Source: BlackRock's Q2 2022 Earnings Release and Conference Call.
Business investors looking at BlackRock's Q2 2022 earnings should note the temporary setback in asset inflows due to a large redemption from a single institutional client, causing a revenue miss despite solid earnings growth. In spite of this, the corporation's non-GAAP net margin sank, indicating a need for cost optimization. However, BlackRock's long-term prospects continue to appeal to investors, with its relatively high dividend yield being a notable attraction.
