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Why Is Invesco (IVZ) Down 0.7% Since Last Earnings Report?

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It has been about a month since the last earnings report for Invesco (IVZ - Free Report) . Shares have lost about 0.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Invesco due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Invesco Beats Q1 Earnings Estimates, Revenues Up Y/Y

Invesco’s first-quarter 2021 adjusted earnings of 68 cents per share surpassed the Zacks Consensus Estimate of 62 cents. Also, the bottom line grew 100% from the prior-year quarter.

Results reflect improvement in revenues and solid growth in AUM balance. However, rise in operating expenses was a headwind.

On a GAAP basis, net income attributable to common shareholders was $267.8 million or 58 cents per share, up substantially from $81.5 million or 18 cents per share a year ago.

Revenues & Expenses Rise

GAAP operating revenues were $1.66 billion, which increased 3.8% year over year. Also, the top line beat the Zacks Consensus Estimate of $1.21 billion. Adjusted net revenues grew 9.2% to $1.25 billion.

Adjusted operating expenses were $748 million, up 2% from the prior-year quarter.

Adjusted operating margin was 40.2%, up from 36% a year ago.

As of Mar 31, 2021, cash and cash equivalents were $1.16 billion, down 18% sequentially. Further, long-term debt amounted to $2.08 billion.

AUM Balance Improves

As of Mar 31, 2021, AUM was $1.41 trillion, which surged 33.3% year over year. Average AUM at first-quarter end totaled $1.40 trillion, up 18.6%.

The company witnessed long-term net inflows of $24.5 billion during the quarter.

Outlook

Management expects net savings related to its cost-saving program of $200 million by 2022-end. Of this, $150 million will likely be achieved in 2021.

Total one-time transaction costs for the realization of the cost-saving program were projected to be $250-$275 million. Of this, $150 million have already been incurred. Of the remaining $100-$125 million that is expected over the next two years, half will be incurred in the remainder of 2021.

Going forward, management expects money market fee waivers to remain in place for the foreseeable future until rates begin to recover to more normalized levels.

For second-quarter 2021, operating expenses are expected to be relatively stable on a sequential basis, on the assumptions that there is no change in markets and FX levels from Mar 31, 2021-level. Further, a modest rise in marketing-related expenses is expected as the first quarter is typically the low point in marketing spend annually.

For second quarter 2021, non-GAAP effective tax rate is expected to be 23-24%.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

At this time, Invesco has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Invesco has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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