BlackRock Inc. (BLK) far exceeded analysts’ expectations on Wednesday with third-quarter earnings rising 74% on profits of $551 million versus $317 million a year ago. Earnings per diluted share of $2.75 significantly beat the consensus estimate of $2.39, and also surpassed Q3 2009’s $2.10 EPS.
In light of BlackRock’s strong performance, the most notable challenge for the company is the continuing effect of outflows and integration costs related to the company’s $13 billion buyout last December of Barclays Global Investors (BGI) and its iShares business.
BlackRock is now the world’s biggest money manager, with assets under management (AUM) totaling an impressive $3.45 trillion as of Sept. 30, up $295.5 billion, or 9%, more than the second quarter, and $2.01 trillion, or 140%, year over year, according to the Q3 2010 earnings release. But merger-related outflows, which totaled $34.4 billion during the quarter, or about 2% of acquired AUM, have brought the total since closing of the BGI transaction to $89.1 billion, about 5% of acquired AUM.
Barclays’ iShares exchange traded funds, with their low-fee index AUM, have accounted for a substantial portion of merger-related outflows, including more than half of those that occurred during the third quarter.
The market’s uncertainty about the potential impact of ETFs on BlackRock’s bottom line has resulted in a drop-off in BLK’s stock price over the course of 2010. BLK shares fell 2.99% in trading Wednesday, closing down 5.22 points to $169.41 per share. The stock has traded as high as $243.80 in the past year.