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Invesco (IVZ) Lags on Q3 Earnings as Revenues Decline
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Invesco Ltd. (IVZ - Free Report) reported third-quarter 2016 adjusted earnings of 60 cents per share, lagging the Zacks Consensus Estimate by a penny. Also, the bottom line came in 1.6% below the prior-year tally.
Lower-than-expected results came due to fall in revenues. However, lower expenses, improvement in assets under management and long-term inflows acted as tailwinds.
On a GAAP basis, net income attributable to common shareholders came in at $241.2 million or 58 cents per share, compared with $249.3 million or 58 cents per share in the year-ago quarter.
GAAP operating revenues were $1.20 billion, down 5.6% year over year. Also, the figure came in below the Zacks Consensus Estimate of $1.24 billion.
Adjusted net revenue fell 5.3% year over year to $854.7 million. The decrease was largely due to a fall in all revenue components.
Adjusted operating expenses were $515.4 billion, down 2.7% from the prior-year quarter. The decline was attributable to a fall in all expense components, except property, office and technology costs, which witnessed a rise.
Adjusted operating margin for the quarter was 39.7% compared with 41.4% in the year-ago quarter.
Asset Position Strengthens
As of Sep 30, 2016, AUM grew 8.5% year over year to $820.2 billion. Average AUM for the quarter totaled $814.1 billion, up 3.2% from the year-ago quarter. Further, the reported quarter witnessed long-term net inflows of $12.2 billion compared with outflows of $3.9 billion in the prior-year quarter.
Share Repurchases
In the reported quarter, Invesco repurchased shares worth $60 million. This included $30.0 million, representing 1 million shares, out of the $150.0 million accelerated share repurchase agreement, announced on Jun 30, 2016.
Our View
Invesco remains well positioned to benefit from improved global investment flows, supported by a diversified footprint and product offering. Also, the company’s steady capital deployment activities will continue to boost investors’ confidence in the stock.
However, high debt levels and incremental implementation costs expected from the business transformation program are anticipated to weigh on Invesco’s performance in the upcoming quarters. Though the company has undertaken cost-cutting measures, their impact is not expected to bear fruits any time soon as Invesco continues to invest in its franchise.
BlackRock, Inc. (BLK - Free Report) reported third-quarter 2016 adjusted earnings of $5.14 per share, which handily surpassed the Zacks Consensus Estimate of $5.05. Earnings were better-than-expected primarily due to a decline in total expenses. However, lower revenues acted as a headwind.
Waddell & Reed Financial Inc. reported third-quarter 2016 adjusted earnings of 64 cents per share, surpassing the Zacks Consensus Estimate of 51 cents. Better-than-expected results were primarily driven by lower expenses. A decline in revenues, elevated outflows and lower assets under management (AUM) were the other undermining factors.
Ameriprise Financial Inc.’s (AMP - Free Report) third-quarter 2016 operating earnings (excluding annual unlocking) per share of $2.29 missed the Zacks Consensus Estimate of $2.41. The results came in lower than expected primarily due to escalated operating expenses. However, a rise in revenues and the increase in assets under management (“AUM”) and assets under administration (“AUA”) were on the positive side.
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Invesco (IVZ) Lags on Q3 Earnings as Revenues Decline
Invesco Ltd. (IVZ - Free Report) reported third-quarter 2016 adjusted earnings of 60 cents per share, lagging the Zacks Consensus Estimate by a penny. Also, the bottom line came in 1.6% below the prior-year tally.
Lower-than-expected results came due to fall in revenues. However, lower expenses, improvement in assets under management and long-term inflows acted as tailwinds.
On a GAAP basis, net income attributable to common shareholders came in at $241.2 million or 58 cents per share, compared with $249.3 million or 58 cents per share in the year-ago quarter.
Lower Operating Costs Help Offset Revenue Dip
GAAP operating revenues were $1.20 billion, down 5.6% year over year. Also, the figure came in below the Zacks Consensus Estimate of $1.24 billion.
Adjusted net revenue fell 5.3% year over year to $854.7 million. The decrease was largely due to a fall in all revenue components.
Adjusted operating expenses were $515.4 billion, down 2.7% from the prior-year quarter. The decline was attributable to a fall in all expense components, except property, office and technology costs, which witnessed a rise.
Adjusted operating margin for the quarter was 39.7% compared with 41.4% in the year-ago quarter.
Asset Position Strengthens
As of Sep 30, 2016, AUM grew 8.5% year over year to $820.2 billion. Average AUM for the quarter totaled $814.1 billion, up 3.2% from the year-ago quarter. Further, the reported quarter witnessed long-term net inflows of $12.2 billion compared with outflows of $3.9 billion in the prior-year quarter.
Share Repurchases
In the reported quarter, Invesco repurchased shares worth $60 million. This included $30.0 million, representing 1 million shares, out of the $150.0 million accelerated share repurchase agreement, announced on Jun 30, 2016.
Our View
Invesco remains well positioned to benefit from improved global investment flows, supported by a diversified footprint and product offering. Also, the company’s steady capital deployment activities will continue to boost investors’ confidence in the stock.
However, high debt levels and incremental implementation costs expected from the business transformation program are anticipated to weigh on Invesco’s performance in the upcoming quarters. Though the company has undertaken cost-cutting measures, their impact is not expected to bear fruits any time soon as Invesco continues to invest in its franchise.
INVESCO LTD Price, Consensus and EPS Surprise
INVESCO LTD Price, Consensus and EPS Surprise | INVESCO LTD Quote
Currently, Invesco carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Asset Managers
BlackRock, Inc. (BLK - Free Report) reported third-quarter 2016 adjusted earnings of $5.14 per share, which handily surpassed the Zacks Consensus Estimate of $5.05. Earnings were better-than-expected primarily due to a decline in total expenses. However, lower revenues acted as a headwind.
Waddell & Reed Financial Inc. reported third-quarter 2016 adjusted earnings of 64 cents per share, surpassing the Zacks Consensus Estimate of 51 cents. Better-than-expected results were primarily driven by lower expenses. A decline in revenues, elevated outflows and lower assets under management (AUM) were the other undermining factors.
Ameriprise Financial Inc.’s (AMP - Free Report) third-quarter 2016 operating earnings (excluding annual unlocking) per share of $2.29 missed the Zacks Consensus Estimate of $2.41. The results came in lower than expected primarily due to escalated operating expenses. However, a rise in revenues and the increase in assets under management (“AUM”) and assets under administration (“AUA”) were on the positive side.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>