Shares of financial giant BlackRock Inc. (BLK), one of the world's largest money management firms with $6.8 trillion in assets under management, including $1.5 trillion in ETFs, has struggled during the great bull market. As its underperformance compared to the broader market continues into 2019, investors' big question ahead of the firm’s third quarter earnings report is how well it will hold up in a slowing economy and equity market. 

For the quarter ended September, analysts on average expect earnings to come in at $7.11 per share, compared to year-ago EPS of $7.52, per Yahoo Finance. Revenue is slated to jump 4.1% year-over-year (YOY) to reach $3.72 billion in Q3. 

In June, BlackRock posted a negative earnings surprise, in which earnings fell 7% to $6.41, short of the consensus at $6.50. The results showed that while over $150 billion in net inflows rushed into the firm, representing a sevenfold increase, more assets don’t always result in more profits. In the latest quarter, performance fees dropped 30%. 

Profits Don't Keep Up With Asset Boom

BlackRock, which revolutionized the financial industry with the introduction of low-cost ETFs and index funds, is now facing off against a growing number of competitors. Price competition has threatened margins and revenues for BlackRock and its rivals, including State Street Corp. (STT), which posted assets up in Q2 but revenues down over last year. 

Investors will be looking out for signs of how well BlackRock is hedging itself against changing investor strategies. CEO Laurence Fink has indicated that the firm is focused on the “diversity of our investment platform,” per The Wall Street Journal. For example, BlackRock’s acquisition of software provider eFront, its largest in a decade, helped boost technology services revenues by 20%. BlackRock’s technology business works to stabilize the business in times of economic swings. 

While BlackRock does not distribute products directly to retail investors, it has invested in technology firms with digital channels that reach consumers. In August, the money manager led a $875 million investment in Authentic Brands Group, owner of brands like Sports Illustrated and Juicy Couture. CFO Gary Shedlin says that the firm will continue to use spare cash for this reason. Some fear that this could cause scrutiny from market waters, investors and perhaps even regulators.

What’s Next?

Lastly, a key point for investors will be any insight into the progress of the firm’s massive organization restructuring. In April, Fink laid out a plan intended to extend BlackRock’s reach outside of the U.S.. This included a leadership overhaul, and a decision to cut about 3% of its global staff, per Bloomberg. As the U.S. market becomes increasingly crowded some analysts see Latin America and China as the next major battlegrounds for asset managers.