BlackRock's ($BLK) third-quarter earnings will likely surpass analyst expectations amid stronger-than-expected net flows, as noted in a recent report from Morgan Stanley. The brokerage’s expectations suggest that net flows will accelerate by 8.3% year-over-year on an organic basis, positioning Morgan Stanley 420 basis points ahead of consensus predictions.
Notably, long-term inflows are forecast to grow at a 5.7% organic rate, indicating a consecutive acceleration in performance. BlackRock is scheduled to release its earnings results for the third quarter on Friday. Morgan Stanley has increased its earnings per share (EPS) estimate for BlackRock's third quarter by 4.6%, adjusting it to $10.73.
This adjustment surpasses the average analyst estimate reported on Capital IQ at $10.34. Furthermore, Morgan Stanley's EPS forecast for the full year has been raised by 2.9%, reaching $42.97, compared to the market's view of $42.37. The revision of the third-quarter estimate primarily reflects higher assets under management, though this is somewhat counterbalanced by the recent acquisition of Global Infrastructure Partners (GIP), which closed on October 1, thus delaying the anticipated benefits to the fourth quarter.
GIP manages approximately $170 billion in assets, as disclosed by BlackRock last week. Morgan Stanley has reiterated an overweight rating on BlackRock’s stock and has increased its price target to $1,150 from a previous $1,036. During Friday's earnings call, analysts at Morgan Stanley will be keenly listening for updates on BlackRock's private markets strategy, which may serve to boost growth.
The GIP transaction allows BlackRock to expand its reach into private markets with a fully scaled infrastructure investment platform, along with $60 billion in fee-paying assets under management, reflecting the firm’s aggressive strategy in diversifying its investment options. In addition, BlackRock's anticipated acquisition of Preqin is expected to further support its private markets expansion, with this deal expected to finalize before the end of 2024, as highlighted by BlackRock at the close of June. The brokerage has expressed optimism that as the Federal Reserve continues to cut rates, there will be a movement of idle cash from the sidelines into risk assets.
This includes potential duration extension in fixed income, which is likely to bolster an acceleration in organic flow growth, according to the report. Recently, the Federal Open Market Committee of the central bank lowered its benchmark lending rate by 50 basis points, indicating a strategic shift that may benefit equity markets moving forward. Price: 938.78, Change: -10.42, Percent Change: -1.10.