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Invesco (IVZ) Q4 Earnings Miss on Lower Revenues & Assets
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Invesco (IVZ - Free Report) reported fourth-quarter 2018 adjusted earnings of 44 cents per share, lagging the Zacks Consensus Estimate of 56 cents. Also, the figure was 39.7% below the prior-year quarter level.
Shares of Invesco have declined more than 2% in pre-market trading indicating that investors haven’t taken the results in their stride. A full day trading will likely depict a better picture.
Results were adversely impacted by lower revenues and decline in assets under management (AUM). Increase in operating expenses was also an undermining factor.
On a GAAP basis, net income attributable to common shareholders for the reported quarter came in at $114.2 million or 28 cents per share, down from $408.2 million or 99 cents per share a year ago.
For 2018, adjusted earnings of $2.43 per share missed the Zacks Consensus Estimate of $2.57. Also, the figure was 10% down year over year. On a GAAP basis, net income attributable to common shareholders was $882.8 million or $2.14 per share compared with $1.13 billion or $2.75 per share in 2017.
Revenues Fall, Expenses Rise
GAAP operating revenues for the quarter were $1.26 billion, down 8.7% year over year. Also, the figure missed the Zacks Consensus Estimate of $1.30 billion. Adjusted net revenues decreased 8.5% year over year to $919.2 million.
GAAP operating revenues for 2018 were $5.31 billion, up 3% year over year. However, it missed the Zacks Consensus Estimate of $5.46 billion. Adjusted net revenues grew 1.7% to $3.82 billion.
Adjusted operating expenses were $619.2 million, up 1.9% from the prior-year quarter. The rise was due to an increase in marketing costs, and property, office and technology expenses.
Adjusted operating margin for the quarter was 32.6% compared with 39.6% a year ago.
AUM Declines
As of Dec 31, 2018, AUM was $888.2 billion, down 5.3% year over year. The decline was mainly due to net market losses and unfavorable foreign exchange rate movements.
Average AUM for the fourth quarter totaled $924.4 billion, down 0.6% from the year-ago quarter. Further, the December quarter witnessed long-term net outflows of $20.1 billion.
Share Repurchase Update
For the purpose of repurchasing its shares, Invesco entered into a forward contract during the fourth quarter. Per the contract, the counterparty purchased $300 million worth of the company's shares during the reported quarter.
Offers Update on OppenheimerFunds Buyout
Invesco had announced a deal to acquire MassMutual’s asset management unit, OppenheimerFunds, Inc in October 2018. The transaction, still subject to regulatory and other third-party approvals, is on track to close in the second quarter of 2019.
Invesco and OppenheimerFunds have made significant progress toward achieving the post-close integration and targeted expense synergies of $475 million through a planned combination of middle- and back-office rationalization, location strategy and leveraging the scale of the global operating platform.
In the fourth quarter, Invesco incurred $32 million charges related to the deal. This included consulting, legal and compensation expenses related to management and personnel changes.
Our View
Invesco remains well poised to benefit from improved global investment flows, supported by a diversified footprint and product offering. Also, its inorganic growth strategy will drive growth in the long run.
However, high-debt levels of the company might affect its profitability over the long run. Mounting expenses will likely continue to hamper bottom-line growth to some extent.
Performance of Other Investment Managers and Upcoming Release
BlackRock’s (BLK - Free Report) fourth-quarter 2018 adjusted earnings of $6.08 per share missed the Zacks Consensus Estimate of $6.39. Further, the bottom line came in 2% lower than the year-ago figure.
Federated Investors, Inc. delivered a positive earnings surprise of 1.7% in fourth-quarter 2018. Earnings per share of 61 cents surpassed the Zacks Consensus Estimate of 60 cents. However, the figure compares unfavorably with the prior-year quarter earnings of $1.31.
Blackstone (BX - Free Report) is slated to report results on Jan 31.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
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Invesco (IVZ) Q4 Earnings Miss on Lower Revenues & Assets
Invesco (IVZ - Free Report) reported fourth-quarter 2018 adjusted earnings of 44 cents per share, lagging the Zacks Consensus Estimate of 56 cents. Also, the figure was 39.7% below the prior-year quarter level.
Shares of Invesco have declined more than 2% in pre-market trading indicating that investors haven’t taken the results in their stride. A full day trading will likely depict a better picture.
Results were adversely impacted by lower revenues and decline in assets under management (AUM). Increase in operating expenses was also an undermining factor.
On a GAAP basis, net income attributable to common shareholders for the reported quarter came in at $114.2 million or 28 cents per share, down from $408.2 million or 99 cents per share a year ago.
For 2018, adjusted earnings of $2.43 per share missed the Zacks Consensus Estimate of $2.57. Also, the figure was 10% down year over year. On a GAAP basis, net income attributable to common shareholders was $882.8 million or $2.14 per share compared with $1.13 billion or $2.75 per share in 2017.
Revenues Fall, Expenses Rise
GAAP operating revenues for the quarter were $1.26 billion, down 8.7% year over year. Also, the figure missed the Zacks Consensus Estimate of $1.30 billion. Adjusted net revenues decreased 8.5% year over year to $919.2 million.
GAAP operating revenues for 2018 were $5.31 billion, up 3% year over year. However, it missed the Zacks Consensus Estimate of $5.46 billion. Adjusted net revenues grew 1.7% to $3.82 billion.
Adjusted operating expenses were $619.2 million, up 1.9% from the prior-year quarter. The rise was due to an increase in marketing costs, and property, office and technology expenses.
Adjusted operating margin for the quarter was 32.6% compared with 39.6% a year ago.
AUM Declines
As of Dec 31, 2018, AUM was $888.2 billion, down 5.3% year over year. The decline was mainly due to net market losses and unfavorable foreign exchange rate movements.
Average AUM for the fourth quarter totaled $924.4 billion, down 0.6% from the year-ago quarter. Further, the December quarter witnessed long-term net outflows of $20.1 billion.
Share Repurchase Update
For the purpose of repurchasing its shares, Invesco entered into a forward contract during the fourth quarter. Per the contract, the counterparty purchased $300 million worth of the company's shares during the reported quarter.
Offers Update on OppenheimerFunds Buyout
Invesco had announced a deal to acquire MassMutual’s asset management unit, OppenheimerFunds, Inc in October 2018. The transaction, still subject to regulatory and other third-party approvals, is on track to close in the second quarter of 2019.
Invesco and OppenheimerFunds have made significant progress toward achieving the post-close integration and targeted expense synergies of $475 million through a planned combination of middle- and back-office rationalization, location strategy and leveraging the scale of the global operating platform.
In the fourth quarter, Invesco incurred $32 million charges related to the deal. This included consulting, legal and compensation expenses related to management and personnel changes.
Our View
Invesco remains well poised to benefit from improved global investment flows, supported by a diversified footprint and product offering. Also, its inorganic growth strategy will drive growth in the long run.
However, high-debt levels of the company might affect its profitability over the long run. Mounting expenses will likely continue to hamper bottom-line growth to some extent.
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 Investment Managers and Upcoming Release
BlackRock’s (BLK - Free Report) fourth-quarter 2018 adjusted earnings of $6.08 per share missed the Zacks Consensus Estimate of $6.39. Further, the bottom line came in 2% lower than the year-ago figure.
Federated Investors, Inc. delivered a positive earnings surprise of 1.7% in fourth-quarter 2018. Earnings per share of 61 cents surpassed the Zacks Consensus Estimate of 60 cents. However, the figure compares unfavorably with the prior-year quarter earnings of $1.31.
Blackstone (BX - Free Report) is slated to report results on Jan 31.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
See Stocks Today >>