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Eaton Vance (EV) Up 2.4% on Q4 Earnings and Revenue Beat

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Eaton Vance Corp.’s shares gained 2.4%, following the release of fourth-quarter and fiscal 2020 (ended Oct 31) results. Adjusted earnings of 88 cents per share for the reported quarter outpaced the Zacks Consensus Estimate of 86 cents. However, the bottom line declined 1% year over year.

The results were driven by a rise in revenues and higher assets under management (AUM) balance (owing to inflows). However, increase in operating expenses was a headwind.

Net loss attributable to shareholders (GAAP basis) was $35.9 million or 31 cents per share versus net income of $109.2 million or 96 cents per share in the prior year.

For fiscal 2020, adjusted earnings per share of $3.29 lagged the consensus estimate of $3.34. Also, the metric was down 1% from the prior year. On a GAAP basis, net income was $138.5 million or $1.20 per share, down from $400 million or $3.50 per share in fiscal 2019.

Revenues & Expenses Up (GAAP basis)

Total revenues for the reported quarter were $451.1 million, up 4% year over year. A rise in management fees and performance fees were the main reason for higher revenues. Also, revenues beat the Zacks Consensus Estimate of $441.1 million.

For fiscal 2020, total revenues grew 3% from a year ago to $1.73 billion. The top line beat the Zacks Consensus Estimate of $1.72 billion.

Total expenses surged 56% from the prior-year quarter to $464.7 million. The rise was due to an increase in compensation, service fee expense, amortization of deferred sales commissions and other operating costs, which were partly offset by lower distribution expenses and fund-related expenses.

Total operating loss was $13.7 million versus operating income of $135.4 million in the prior-year period.   

Liquidity Position Strong, AUM Balance Improves

As of Oct 31, 2020, Eaton Vance had $799.4 million in cash and cash equivalents compared with $557.7 million on Oct 31, 2019. The company had no borrowings outstanding under the $300-million credit facility.

Eaton Vance’s consolidated AUM rose 4% year over year to $515.7 billion as of Oct 31, 2020. For the fiscal fourth quarter, the company recorded market price appreciation of $11.7 billion, net inflows of $4.7 billion and new managed assets of $2.3 billion from the acquisition of business assets of WaterOak Advisors, LLC.

Share Repurchase Update

During fiscal 2020, Eaton Vance repurchased and retired nearly 4.2 million shares of its Non-Voting Common Stock for $171.5 million under the company’s existing repurchase authorization.

Major Development

On Oct 8, Eaton Vance inked a deal to be acquired by Morgan Stanley (MS - Free Report) for an equity value of about $7 billion. The stock-cum-cash deal, which still awaits certain customary approvals, is anticipated to close in second-quarter 2021.

Per the terms of the transaction, Eaton Vance shareholders will receive $28.25 per share in cash and 0.5833 shares of Morgan Stanley for each Eaton Vance common stock held.

Our Viewpoint

Despite economic slowdown, Eaton Vance is expected to witness growth in revenues driven by solid AUM balance and diverse product offerings. Also, its global footprint is expected to keep supporting growth.

Eaton Vance Corporation Price, Consensus and EPS Surprise

Eaton Vance Corporation Price, Consensus and EPS Surprise

Eaton Vance Corporation price-consensus-eps-surprise-chart | Eaton Vance Corporation Quote

Currently, Eaton Vance 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 Asset Managers

Cohen & Steers’ (CNS - Free Report) third-quarter 2020 adjusted earnings of 67 cents per share surpassed the Zacks Consensus Estimate of 60 cents. Moreover, the bottom line was 3.1% higher than the year-ago reported figure.

Invesco (IVZ - Free Report) reported third-quarter 2020 adjusted earnings of 53 cents per share, beating the Zacks Consensus Estimate of 48 cents. However, the bottom line declined 24.3% from the prior-year quarter.

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