Invesco Ltd.’s (IVZ - Analyst Report) second-quarter 2013 adjusted earnings were 50 cents per share, missing the Zacks Consensus Estimate by a penny. Further, this was in line with the prior-quarter figure.
A slight rise in revenues and a fall in expenses were the positives for the quarter. Further, the company’s balance sheet position remained stable. However, a marginal fall in assets under management (AUM) was the headwind.
On a GAAP basis, net income in the reported quarter was $202.6 million or 45 cents per share, down from $222.2 million or 49 cents in the prior quarter.
Adjusted net revenue nudged up 0.3% sequentially to $790.3 million in the reported quarter, driven by an increase in investment management fees, partially offset by a fall in performance fee revenues. However, net revenue was significantly below the Zacks Consensus Estimate of $1.2 billion.
Adjusted operating expenses dipped 0.4% from the prior quarter to $479.7 million. The marginal fall was primarily due to lower employee compensation expenses, partially offset by increases in general and administrative expenses as well as marketing costs.
Adjusted operating margin for the quarter was 39.3%, up from 38.9% in the prior quarter.
As of Jun 30, 2013, AUM dropped 0.3% sequentially to $705.6 billion, reflecting net market losses and unfavorable foreign exchange rate changes. Average AUM for the reported quarter was $719.8 billion, up 4.1% from $691.6 billion in the prior quarter.
Long-term net inflows were $1.4 billion, compared with $14.3 billion in the previous quarter.
As of Jun 30, 2013, cash and cash equivalents were $916.2 million, compared with $835.5 million as of Dec 31, 2012. Total debt was $1,445.6 million as of Jun 30, 2013, against $1,186.0 million as of Dec 31, 2012.
Additionally, credit facility balance reached $846.0 million as of Jun 30, 2013, compared with $586.5 million as of Dec 31, 2012.
Share Repurchase Update
In the reported quarter, Invesco repurchased 2.2 million shares worth $75.5 million.
Along with the earnings release, the company declared second-quarter dividend of 22.5 cents per share. The dividend will be paid on Sep 6 to shareholders of record as of Aug 21.
During the reported quarter, Invesco announced that it had entered into a definitive agreement to divest Atlantic Trust Private Wealth Management to Canadian Imperial Bank of Commerce (CM - Snapshot Report) for $210 million. The deal, expected to close in the second half of 2013, is still subject to regulatory approval.
Performance of Other Investment Management Stocks
Second-quarter earnings per share of BlackRock Inc. (BLK - Analyst Report) and Ameriprise Financial Inc. (AMP - Analyst Report) surpassed the Zacks Consensus Estimate. The improved results for both the companies were primarily attributable to increased top line, partially offset by higher operating expenses.
Invesco’s long-term investment performance was boosted by an uptrend in the global equity markets, which is expected to drive the company’s operating results as well. Moreover, the operating leverage will likely improve over the long term due to the company’s cost-control initiatives.
Invesco is well positioned to benefit from improved global investment flows owing to its broad diversification. Additionally, meaningful capital deployment activities will enhance shareholders’ confidence in the stock. However, the volatile U.S. dollar and rising competition remain matters of concern.
Currently, Invesco carries a Zacks Rank #4 (Sell).