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Invesco (IVZ) Down 5.2% Since Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Invesco Ltd. (IVZ - Free Report) . Shares have lost about 5.2% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is IVZ due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Invesco Q1 Earnings In Line, Revenues & AUM Rise Y/Y
Invesco reported first-quarter 2018 adjusted earnings of 67 cents per share, in line with the Zacks Consensus Estimate. The figure was 9.8% above the prior-year quarter level.
Results were primarily supported by higher revenues and long-term net inflows. Further, the company reported a rise in assets under management. However, increase in operating expenses was an undermining factor.
On a GAAP basis, net income attributable to common shareholders came in at $253.9 million or 62 cents per share, up from $212 million or 52 cents per share a year ago.
Revenues & Expenses Rise
GAAP operating revenues for the quarter were $1.36 billion, up 13.7% year over year. The figure marginally lagged the Zacks Consensus Estimate of $1.37 billion. Adjusted net revenues increased 10.5% year over year to $958 million.
Adjusted operating expenses were $600.7 million, up 11.1% from the prior-year quarter. The rise was due to an increase in all expense components except employee compensation costs.
Adjusted operating margin for the quarter was 37.3% compared with 37.6% a year ago.
Strong AUM
As of Mar 31, 2018, AUM was $934.2 billion, up 11.9% year over year. Average AUM for the reported quarter totaled $951.3 billion, up 14.6% from the year-ago quarter. Further, the reported quarter witnessed long-term net inflows of $0.3 billion.
Outlook
The company expects to witness organic growth rate of 3% to 5% in the near future, driven by better flow consistency and business diversification.
Management expects net revenue yield (excluding performance fees) in 2018 to be nearly 40 bps (1 bps lower than the previous guidance). This will be attributable to the acquisition of ETF business (Source and Guggenheim), which will be dilutive to the net revenue yield by 1.5 bps. These will be partially offset by improving foreign exchange rates and sales mix trends.
Moreover, in 2018, performance fees are projected to be around $10-$15 million per quarter and adjusted other revenues to be in the range of $16-$17 million on a quarterly basis.
On the cost front, management expects compensation expenses to be roughly $400-$405 million per quarter in 2018.
On a quarterly basis in 2018, the company expects market expenses to be nearly $32 million, property, office and technology costs to be in range of $102-$104 million and G&A expenses to be in the range of nearly $76-$79 million.
Based on the above-mentioned guidance and expecting flat markets and foreign exchange, management expects incremental margin target for 2018 at the 40% to 50% level. For 2019 and beyond, the company anticipates incremental margin to be in the 50% to 65% level, mainly driven by revenue growth.
Management expects effective tax rate in 2018 to be 20-21%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter.
At this time, IVZ has a poor Growth Score of F. Its Momentum is doing a lot better with a C. The stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise IVZ has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Invesco (IVZ) Down 5.2% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Invesco Ltd. (IVZ - Free Report) . Shares have lost about 5.2% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is IVZ due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Invesco Q1 Earnings In Line, Revenues & AUM Rise Y/Y
Invesco reported first-quarter 2018 adjusted earnings of 67 cents per share, in line with the Zacks Consensus Estimate. The figure was 9.8% above the prior-year quarter level.
Results were primarily supported by higher revenues and long-term net inflows. Further, the company reported a rise in assets under management. However, increase in operating expenses was an undermining factor.
On a GAAP basis, net income attributable to common shareholders came in at $253.9 million or 62 cents per share, up from $212 million or 52 cents per share a year ago.
Revenues & Expenses Rise
GAAP operating revenues for the quarter were $1.36 billion, up 13.7% year over year. The figure marginally lagged the Zacks Consensus Estimate of $1.37 billion. Adjusted net revenues increased 10.5% year over year to $958 million.
Adjusted operating expenses were $600.7 million, up 11.1% from the prior-year quarter. The rise was due to an increase in all expense components except employee compensation costs.
Adjusted operating margin for the quarter was 37.3% compared with 37.6% a year ago.
Strong AUM
As of Mar 31, 2018, AUM was $934.2 billion, up 11.9% year over year. Average AUM for the reported quarter totaled $951.3 billion, up 14.6% from the year-ago quarter. Further, the reported quarter witnessed long-term net inflows of $0.3 billion.
Outlook
The company expects to witness organic growth rate of 3% to 5% in the near future, driven by better flow consistency and business diversification.
Management expects net revenue yield (excluding performance fees) in 2018 to be nearly 40 bps (1 bps lower than the previous guidance). This will be attributable to the acquisition of ETF business (Source and Guggenheim), which will be dilutive to the net revenue yield by 1.5 bps. These will be partially offset by improving foreign exchange rates and sales mix trends.
Moreover, in 2018, performance fees are projected to be around $10-$15 million per quarter and adjusted other revenues to be in the range of $16-$17 million on a quarterly basis.
On the cost front, management expects compensation expenses to be roughly $400-$405 million per quarter in 2018.
On a quarterly basis in 2018, the company expects market expenses to be nearly $32 million, property, office and technology costs to be in range of $102-$104 million and G&A expenses to be in the range of nearly $76-$79 million.
Based on the above-mentioned guidance and expecting flat markets and foreign exchange, management expects incremental margin target for 2018 at the 40% to 50% level. For 2019 and beyond, the company anticipates incremental margin to be in the 50% to 65% level, mainly driven by revenue growth.
Management expects effective tax rate in 2018 to be 20-21%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter.
Invesco Ltd. Price and Consensus
Invesco Ltd. Price and Consensus | Invesco Ltd. Quote
VGM Scores
At this time, IVZ has a poor Growth Score of F. Its Momentum is doing a lot better with a C. The stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise IVZ has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.