It has been about a month since the last earnings report for Invesco (
IVZ Quick Quote IVZ - Free Report) . Shares have lost about 2.1% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Invesco Q3 Earnings Top Estimates, Revenues & AUM Rise
Invesco's third-quarter 2021 adjusted earnings of 77 cents per share outpaced the Zacks Consensus Estimate of 73 cents. The bottom line grew 45.3% from the prior-year quarter.
Results reflected an improvement in revenues and solid growth in AUM balance. However, a rise in operating expenses was a headwind. On a GAAP basis, net income attributable to common shareholders was $330.1 million or 71 cents per share, up from $191.7 million or 41 cents per share a year ago. Revenues & Expenses Rise
GAAP operating revenues were $1.75 billion, growing 16.9% year over year. Adjusted net revenues increased 22.1% to $1.33 billion.
Adjusted operating expenses were $771.9 million, up 13% from the prior-year quarter. Adjusted operating margin was 42.1%, up from 37.2% a year ago. AUM Balance Improves
As of Sep 30, 2021, AUM was $1.53 trillion, which soared 25.5% year over year. Average AUM at third-quarter end totaled $1.54 trillion, up 27.7%.
The company witnessed long-term net inflows of $13.3 billion during the quarter, up from $7.8 billion in the prior-year period. Strong Balance Sheet
As of Sep 30, 2021, cash and cash equivalents were $1.77 billion, up 33% sequentially. Further, long-term debt amounted to $2.08 billion.
As of Sep 30, 2021, the credit facility balance was zero. Outlook
Management expects net savings related to its cost-saving program of $200 million by 2022-end. Of this, more than $150 million is expected to be achieved in 2021 (almost 74% of the targeted $200 million has already been achieved).
Total one-time transaction costs for the realization of the cost-saving program are projected to be $250-$275 million. Of this, $190 million have already been incurred. The company expects the remaining transaction costs of $60-$85 million to be incurred through the end of 2022. 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. Performance fee in the fourth quarter of 2021 is expected to be in line with the company's experience across the first three quarters of the year. For fourth-quarter 2021, total operating expenses are expected to be relatively flat sequentially, assuming no change in markets and foreign exchange levels as of Sep 30, 2021. However, a modest rise in marketing-related expenses is expected as spend generally increases in the fourth quarter. The company anticipates outsourced administration costs (which is reflected in property, office and technology expenses) to increase by $25 million on an annual basis or $6 million per quarter. To offset this, there will likely be a corresponding increase in service and distribution revenues, resulting in a minimal impact on operating income. For the fourth quarter, the 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 a downward trend in fresh estimates.
At this time, Invesco has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Invesco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.