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Evercore (EVR) Q3 Earnings Impressive, Stock Appreciates 6%

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Following Evercore’s (EVR - Free Report) third-quarter 2020 earnings release, shares of the company have rallied around 6%. The company reported adjusted earnings per share of $1.11, handily beating the Zacks Consensus Estimate of 37 cents on solid underwriting fees. However, results were down 12% from the prior-year quarter’s $1.26 per share.

The quarterly results reflect higher assets under management (AUM) and stable revenues. In addition, liquidity position was consistently strong. However, escalating expenses was a major drag.

Including certain one-time items, on a GAAP basis, net income available to common shareholders was $42.6 million or $1.01 per share compared with the $43.3 million or $1.01 per share reported in the year-ago quarter.

Revenues Stable, Expenses Rise

Net revenues remained flat year over year at $408.5 million in the reported quarter. Hike in underwriting fees and other revenues were offset by lower advisory fees and commissions and related fees. The figure surpassed the Zacks Consensus Estimate of $335.7 million. On a GAAP basis, net revenues were $402.5 million, almost unchanged.

Total expenses flared up 2.2% to $330.9 million from the prior-year quarter. This upswing mainly stemmed from rise in employee compensation and benefits expenses.

Adjusted compensation ratio was 63.6%, up from the year-earlier quarter’s 58%.

Adjusted operating margin came in at 19% compared with the prior-year quarter’s 20.8%.

Quarterly Segment Performance (Adjusted)

Investment Banking: Net revenues declined marginally year over year to $390.3 million. Also, operating income slid 11% to $71.6 million. Advisory client transactions were 206,000, down 3% year over year. Notably, underwriting revenues of $66.5 million in the quarter more than doubled compared with the prior-year period.

Investment Management: Net revenues were $18.2 million, up 11% from the prior year’s comparable quarter. Operating income was $6.1 million, up 37% year over year. Additionally, an AUM of $10.9 million was reported in the third quarter, up 7% year over year. 

Balance-Sheet Position

As of Sep 30, 2020, cash, cash equivalents, marketable securities and certificates of deposit totaled $1.1 billion. Moreover, current assets exceeded current liabilities by $1 billion as of the same date.

Capital Deployment

During the reported quarter, the company repurchased 16,000 shares from employees for the net settlement of stock-based compensation awards at an average price of $58.37 per share.

Concurrent with earnings, Evercore’s board of directors announced a common stock quarterly dividend of 61 cents per share, up 5% from the prior payout. The dividend will be paid on Dec 11, to shareholders of record as of Nov 27, 2020.

Our Viewpoint

Evercore displayed an impressive performance during the July-September quarter. Its top-line strength displays earnings stability. Apart from this, the company’s strategic initiatives to bolster its investment banking segment bode well. Though escalating expenses are a concern, it is well poised to undertake any opportunistic expansion given its sound liquidity position.

Evercore Inc Price, Consensus and EPS Surprise

Evercore Inc Price, Consensus and EPS Surprise

Evercore Inc price-consensus-eps-surprise-chart | Evercore Inc Quote

Currently, Evercore flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.


Performance of Other Banks

Charles Schwab’s (SCHW - Free Report) third-quarter 2020 adjusted earnings of 51 cents per share beat the Zacks Consensus Estimate of 47 cents. However, the bottom line decreased 27% from the prior-year quarter. Results reflect solid client assets balance and a rise in new brokerage accounts. These were driven by solid client activity in the coronavirus pandemic-induced volatile markets. However, lower revenues and an increase in expenses acted as headwinds.

We now look forward to the upcoming quarterly results of Raymond James Financial, Inc. (RJF - Free Report) and LPL Financial Holdings Inc. (LPLA - Free Report) . Raymond James and LPL Financial are slated to release results for the September-end quarter on Oct 28 and Oct 29, respectively.

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