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Solid AUM Aids Invesco's (IVZ) Top Line Despite High Costs
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Invesco (IVZ - Free Report) remains well-poised for top-line growth, supported by its diverse product offerings, alternative investment strategies and robust assets under management (AUM) growth. Synergies from strategic buyouts will likely keep aiding the company’s profitability.
However, despite cost-saving efforts, persistently increasing expenses might hurt the bottom line. Also, the presence of considerably high levels of goodwill and intangible assets on the company's balance sheet is concerning.
Analysts also do not seem optimistic regarding IVZ’s earnings growth prospects. The Zacks Consensus Estimate for the company’s 2022 earnings has moved 3.9% lower over the past 30 days. Thus, Invesco currently carries a Zacks Rank #3 (Hold).
Over the past year, shares of the company have lost 6.9% compared with the industry’s 9.5% decline.
Image Source: Zacks Investment Research
Looking at the fundamentals, Invesco’s total operating revenues witnessed a six-year (2016-2021) compound annual growth rate (CAGR) of 7.8%. The increase was mainly driven by a solid AUM balance and the OppenheimerFunds buyout. The company's diverse product offerings and alternative investment strategies are expected to continue attracting investors, thereby supporting revenue growth.
Though the company’s total AUM declined in 2018, the same witnessed a CAGR of 14.7% over the last six years (ended 2021). The acquisition of OppenheimerFunds has primarily resulted in the rise in the company's AUM balance, making it one of the leading global asset managers.
Further, Invesco has been capitalizing on the growing demand for passive products and alternate asset classes, which were 32.8% and 12.2% of total AUM, respectively, on Dec 31, 2021.
Invesco has been focused on improving its financial strength and liquidity amid the coronavirus mayhem. In April 2020, it slashed the quarterly dividend by 50% to 15.5 cents per share and suspended share repurchases. However, supported by solid cash flow generation since then, it increased the quarterly dividend by 10% to 17 cents per share in April 2021.
Though IVZ did not purchase any shares in 2021, it announced a repurchase authorization to buy back up to $200 million worth of shares in first-quarter 2022. Supported by efficient capital deployment activities, the company is expected to continue enhancing shareholder value.
However, the company’s expenses have witnessed a six-year (2016-2021) CAGR of 7.3%. While Invesco exceeded its target of realizing net cost synergies from the OppenheimerFunds acquisition, operating expenses are likely to remain elevated in the near term, given the company's inorganic growth efforts and investments in franchise.
As of Dec 31, 2021, the company’s goodwill and net intangible assets remained considerably high, totaling $16.1 billion (accounting for 49.3% of total assets). The goodwill and intangible assets on Invesco's balance sheet are subject to annual impairment reviews. Several factors may initiate the impairment of the book value of such assets, due to which their value may have to be written down. may adversely affect the company's financials.
Over the past six months, shares of East West Bancorp have gained 11.3%, whereas Ameriprise has rallied 13.3%.
Over the past 60 days, the Zacks Consensus Estimate for East West Bancorp’s current-year earnings has been revised 6.6% upward, while the same for Ameriprise has moved 5.2% north.
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Solid AUM Aids Invesco's (IVZ) Top Line Despite High Costs
Invesco (IVZ - Free Report) remains well-poised for top-line growth, supported by its diverse product offerings, alternative investment strategies and robust assets under management (AUM) growth. Synergies from strategic buyouts will likely keep aiding the company’s profitability.
However, despite cost-saving efforts, persistently increasing expenses might hurt the bottom line. Also, the presence of considerably high levels of goodwill and intangible assets on the company's balance sheet is concerning.
Analysts also do not seem optimistic regarding IVZ’s earnings growth prospects. The Zacks Consensus Estimate for the company’s 2022 earnings has moved 3.9% lower over the past 30 days. Thus, Invesco currently carries a Zacks Rank #3 (Hold).
Over the past year, shares of the company have lost 6.9% compared with the industry’s 9.5% decline.
Image Source: Zacks Investment Research
Looking at the fundamentals, Invesco’s total operating revenues witnessed a six-year (2016-2021) compound annual growth rate (CAGR) of 7.8%. The increase was mainly driven by a solid AUM balance and the OppenheimerFunds buyout. The company's diverse product offerings and alternative investment strategies are expected to continue attracting investors, thereby supporting revenue growth.
Though the company’s total AUM declined in 2018, the same witnessed a CAGR of 14.7% over the last six years (ended 2021). The acquisition of OppenheimerFunds has primarily resulted in the rise in the company's AUM balance, making it one of the leading global asset managers.
Further, Invesco has been capitalizing on the growing demand for passive products and alternate asset classes, which were 32.8% and 12.2% of total AUM, respectively, on Dec 31, 2021.
Invesco has been focused on improving its financial strength and liquidity amid the coronavirus mayhem. In April 2020, it slashed the quarterly dividend by 50% to 15.5 cents per share and suspended share repurchases. However, supported by solid cash flow generation since then, it increased the quarterly dividend by 10% to 17 cents per share in April 2021.
Though IVZ did not purchase any shares in 2021, it announced a repurchase authorization to buy back up to $200 million worth of shares in first-quarter 2022. Supported by efficient capital deployment activities, the company is expected to continue enhancing shareholder value.
However, the company’s expenses have witnessed a six-year (2016-2021) CAGR of 7.3%. While Invesco exceeded its target of realizing net cost synergies from the OppenheimerFunds acquisition, operating expenses are likely to remain elevated in the near term, given the company's inorganic growth efforts and investments in franchise.
As of Dec 31, 2021, the company’s goodwill and net intangible assets remained considerably high, totaling $16.1 billion (accounting for 49.3% of total assets). The goodwill and intangible assets on Invesco's balance sheet are subject to annual impairment reviews. Several factors may initiate the impairment of the book value of such assets, due to which their value may have to be written down. may adversely affect the company's financials.
Stocks Worth a Look
A couple of better-ranked stocks from the finance space are East West Bancorp (EWBC - Free Report) and Ameriprise Financial, Inc. (AMP - Free Report) . At present, EWBC sports a Zacks Rank #1 (Strong Buy), whereas AMP carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the past six months, shares of East West Bancorp have gained 11.3%, whereas Ameriprise has rallied 13.3%.
Over the past 60 days, the Zacks Consensus Estimate for East West Bancorp’s current-year earnings has been revised 6.6% upward, while the same for Ameriprise has moved 5.2% north.