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Why Is Eaton Vance (EV) Down 5.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for Eaton Vance (EV - Free Report) . Shares have lost about 5.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Eaton Vance 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 drivers.

Eaton Vance Q1 Earnings Lag on Lower Revenues

Eaton Vance Corp.’s first-quarter fiscal 2019 (ended Jan 31) adjusted earnings of 73 cents per share lagged the Zacks Consensus Estimate of 74 cents. Moreover, the bottom line was 6% lower than the prior-year quarter level.

Results were hurt by a decline in revenues and marginally higher expenses. Moreover, decrease in assets under management (AUM) on a year-over-year basis was a headwind for the company. However, its liquidity position remained strong.

Net income attributable to shareholders (GAAP basis) was $86.8 million or 75 cents per share, up from $78.1 million or 63 cents per share in the year-ago quarter.

Revenues Decline, Expenses Rise Marginally

Total revenues in the reported quarter were $406.4 million, down 3% year over year. The decline was due to fall in all revenue components except for other revenues. Moreover, the top line missed the Zacks Consensus Estimate of $422.9 million.

Total expenses increased marginally from the prior-year quarter to $285.3 million, largely due to higher amortization of deferred sales commissions as well as other expenses.

Total operating income declined 11% year over year to $121.1 million.

Liquidity Position Strong, AUM Decreases

As of Jan 31, 2019, Eaton Vance had $449.2 million in cash and cash equivalents compared with $600.7 million on Oct 31, 2018. The company had no borrowings outstanding against its $300-million credit facility.

Eaton Vance’s consolidated AUM decreased 1% year over year to $444.7 billion as of Jan 31, 2019. The reported quarter witnessed net inflows of $1.5 billion.

Share Repurchases

During first-quarter fiscal 2019, Eaton Vance repurchased and retired nearly 3.1 million shares of its Non-Voting Common Stock for $115 million under the company’s existing repurchase authorization.

Outlook

Effective tax rate for fiscal 2019 is anticipated to be 25.9-26.4%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Eaton Vance has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Eaton Vance has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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