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Invesco Beats Q3 Earnings, Misses Revs

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Invesco Ltd. (IVZ - Free Report) reported third-quarter 2013 adjusted earnings of 55 cents per share, beating the Zacks Consensus Estimate by 3 cents. Additionally, this was 37.5% above the prior-year quarter figure of 40 cents.

Better-than-expected results were driven by top-line growth, partially offset by higher expenses. Further, the company’s balance sheet position remained stable, while assets under management (AUM) improved.

On a GAAP basis, net income attributable to common shareholders was $228.1 million or 51 cents per share, up from $170.6 million or 38 cents in the year-ago quarter.

Business Highlights

Adjusted net revenue grew 15.3% year over year to $816.4 million in the reported quarter. Growth in all the revenue components led to rise. However, net revenue lagged the Zacks Consensus Estimate of $1.2 billion.

Adjusted operating expenses increased 5.3% from the prior-year quarter to $488.3 million. This was mainly due to rise in employee compensation expenses and general and administrative expenses, partially offset by lower marketing costs.
Adjusted operating margin for the quarter was 40.2%, up from 34.5% in the prior-year quarter.

As of Sep 30, 2013, AUM rose 12.4% year over year to $745.5 billion. Average AUM for the said quarter was $729.4 billion, up 12.5% from $648.5 billion in the prior-year quarter. Further, long-term net inflows fell to $5.0 billion from $8.5 billion on a year-over-year basis.

Balance Sheet

As of Sep 30, 2013, cash and cash equivalents were $1,174.5 million, compared with $835.5 million as of Dec 31, 2012. Total long-term debt was $1,387.6 million as of Sep 30, 2013, against $1,186.0 million as of Dec 31, 2012.

Additionally, credit facility balance was $788.0 million as of Sep 30, 2013, compared with $586.5 million as of Dec 31, 2012.

Capital Deployment Initiatives

In the reported quarter, Invesco did not repurchase shares. On Oct 11, 2013, the company authorized an additional $1.5 billion for the existing share repurchase program with no stated expiry date.

Along with the earnings release, the company declared second-quarter dividend of 22.5 cents per share. The dividend will be paid on Dec 9 to shareholders of record as of Nov 15.

Performance of Other Asset Managers

Third-quarter earnings per share of Ameriprise Financial Inc. (AMP - Free Report) outpaced the Zacks Consensus Estimate. Better-than-expected results were mainly attributable to rise in revenues, partially offset by higher expenses.

BlackRock, Inc.’s (BLK - Free Report) third-quarter adjusted earnings were in line with the Zacks Consensus Estimate. Results on a year-over-year basis benefited from a rise in revenues, partly offset by higher operating expenses.

The Blackstone Group L.P.’s (BX - Free Report) third-quarter economic net income marginally missed the Zacks Consensus Estimate. Lower-than-expected results were due to a fall in the top line, partially offset by lower expenses.

Our Viewpoint

Invesco’s long-term investment performance continues to benefit from an improvement in the global equity markets, which are expected to drive the company’s operating results as well. The company is well positioned to benefit from increased global investment flows owing to its broad diversification. However, high debt levels and rising expenses remain causes of concern.

Currently, Invesco carries a Zacks Rank #2 (Buy).

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