BlackRock Inc. BLK has completed the acquisition of Preqin, a premier independent provider of private markets data, for almost $3.2 billion (£2.55 billion) in cash. The deal represents a strategic expansion of the company’s Aladdin technology business into the rapidly growing private markets data segment.
 
Over the past year, BLK has been striving to expand its presence in the lucrative private markets business. In sync with this, in December 2024, the company agreed to acquire HPS Investment Partners for $12 billion in an all-equity transaction, signaling a deeper foray into the private credit market.

In October 2024, the company had acquired Global Infrastructure Partners (GIP) to enhance its infrastructural offerings and origination capabilities. Earlier this week, BLK agreed to acquire Panama Ports Company and certain ports from Hutchison Port Holdings through GIP in a consortium with Terminal Investment Limited. This expands the company’s presence in global infrastructure, primarily in maritime logistics. The deal includes 43 ports across 23 countries (excluding China) and is valued at $22.8 billion.

Thus, by engaging in opportunistic buyouts, BlackRock is expanding its global reach, boosting assets under management (AUM) balance and diversifying its revenue streams.

Other Factors That Support BlackRock Stock

Product Diversification to Boost AUM: BlackRock has been focusing on diversifying its product suite and revenue mix, which has been improving its AUM over the years. The company’s inorganic growth strategy also contributed to AUM's growth.

AUM witnessed a five-year (2019-2024) compound annual growth rate (CAGR) of 9.2%. As of Dec. 31, 2024, BlackRock’s total AUM was a record $11.55 trillion. Last year, the company witnessed record net inflows of $641 billion, including industry-leading exchange-traded funds (ETF) net inflows of $390 billion. The momentum will likely continue as efforts to strengthen the iShares unit (offering more than 1,400 ETFs globally) and ETF operations (it received approval for spot Bitcoin and ether ETFs in January 2024) and enhanced focus on the active equity business are likely to offer support.
 
This February, Bloomberg reported that BlackRock plans to list an ETF product tied to Bitcoin in Europe. Further, last September, it collaborated with Partners Group to introduce a multi-private markets model solution, boosting retail investors’ accessibility to alternative investments.

Thus, such product diversification efforts are likely to bolster the company’s revenue mix, reduce revenue concentration risk and allow it to serve a broader range of clients. Further, interest rate cuts and the Trump administration’s pro-business stance fueled optimism in the market, which will enhance investor participation and thus drive AUM and top-line growth. The company’s GAAP revenues witnessed a CAGR of 7% over the last five years ended 2024.

Additionally, the company's combination of HPS Investment, Preqin and GIP data with its alternative asset management platform, eFront, will drive solid revenue growth in the quarters ahead.

Sales Estimates

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Impressive Capital Distributions: As of Dec. 31, 2024, BLK had borrowings of $12.3 billion, while cash and cash equivalents were $12.8 billion. This indicates balance sheet strength and a decent liquidity position.

This January, the company announced a 2% hike in the quarterly dividend to $5.21 per share. BLK has increased its dividend five times in the last five years with an annualized dividend growth rate of 8.8%.

Also, the company has a 47% payout ratio, while its peers, T. Rowe Price Group, Inc. TROW and SEI Investments Co. SEIC, have 53% and 22% payout ratios, respectively.

Dividend Yield

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Also, BlackRock has a share repurchase plan in place.  As of Dec. 31, 2024, roughly 3.8 million shares remained available under the authorization. The company aims to buy back shares worth $1.5 billion this year.

Bullish Analyst Sentiments for BLK

These expansion efforts are expected to boost revenues and profitability going forward. Analyst estimates for earnings support this optimism.

Over the past month, the Zacks Consensus Estimate for 2025 earnings of $47.41 has been revised marginally downward, while the same for 2026 earnings has moved marginally upward to $54.05 per share.

Estimate Revision Trend

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The projected figures imply a rise of 8.7% and 14% for 2025 and 2026, respectively.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

How to Play BlackRock Stock Now

BLK stock has risen 16.4%, outperforming its close peers — TROW and SEIC — over the past year alongside its industry and the S&P 500 index. However, it has underperformed Zacks Finance Sector over the same time frame.

One-Year Price Performance

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In terms of valuation, BLK’s price-to-book ratio (P/B) of 3.15X is lower than the industry's 3.65X. Thus, the stock is trading at a discount. This suggests that investors may be paying a lower price relative to the company's expected earnings growth.

Price-to-Book Ratio Trend

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BlackRock is well-positioned to capitalize on acquisitions and expand its presence in the fast-growing private markets. The record AUM level, product diversification efforts and favorable changes expected from the Trump administration are other tailwinds for the company. Moreover, bullish analyst sentiments and lower valuation compared to peers reflect bright prospects.
 
Further, BlackRock’s growth initiatives have helped generate higher returns. This is demonstrated by the company’s return on equity (ROE) of 15.63% compared with the industry’s ROE of 12.58%.

Return on Equity Trend

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However, a steady rise in expenses is a headwind. The company recorded a five-year CAGR of 7.4% (ended 2024), mainly due to higher general and administration (G&A) costs. Overall costs are expected to remain elevated in the near term due to the company’s business expansion plans. Management expects core G&A expenses in 2025 to increase in the mid to high-single-digit percentage range.

Thus, investors should watch out for these concerns and also monitor how BlackRock integrates the acquisitions into its businesses and generates solid profits before making any investment decision. Those who already own the stock can hold on to it for robust long-term gains.

Currently, BLK carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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