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Eaton Vance (EV) Q3 Earnings Beat Estimates, Stock Down 1.5%

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Eaton Vance Corp.’s (EV - Free Report) third-quarter fiscal 2018 (ended Jul 31) adjusted earnings of 82 cents per share surpassed the Zacks Consensus Estimate of 81 cents. Also, the bottom line was 32% higher than the prior-year quarter’s tally.

Higher revenues and growth in assets under management (AUM) on a year-over-year basis supported the results. Further, the company’s liquidity position remained strong. However, rise in operating expenses was a headwind. Probably due to this negative aspect shares of the company have declined 1.5% following the release.

Net income attributable to shareholders (GAAP basis) was $101.8 million or 83 cents per share, up from $67.4 million or 58 cents per share in the year-ago quarter.

Revenues Rise, Expenses Flare Up

Total revenues were $430.6 million, up 9% year over year. This upside was primarily driven by higher management fees and other revenues. However, the top line marginally lagged the Zacks Consensus Estimate of $430.8 million.

Total expenses increased 6% from the prior-year quarter to $288.3 million, largely due to higher compensation and related costs, fund-related expenses, amortization of deferred sales commissions, and other expenses.

Total operating income grew 18% year over year to $142.3 million.

Liquidity Position Strong, AUM Improves

As of Jul 31, 2018, Eaton Vance had $562.9 million in cash and cash equivalents compared with $610.6 million as of Oct 31, 2017. Further, the company had no borrowings outstanding against its $300-million credit facility.

Eaton Vance’s consolidated AUM increased 12% from the year-ago quarter to $453.2 billion, reflecting net inflows of $23.2 billion and a market price appreciation of $24.4 billion.

Share Repurchase

During the first nine months of fiscal 2018, Eaton Vance repurchased nearly 3.4 million shares of its Non-Voting Common Stock for $186.1 million under the company’s existing repurchase authorization.

Our Viewpoint

Eaton Vance’s improving AUM, along with revenue rise, will likely support its growth in the quarters ahead. However, escalating expenses remain a major headwind.

Eaton Vance Corporation Price, Consensus and EPS Surprise
 

Eaton Vance Corporation Price, Consensus and EPS Surprise | 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 Investment Managers

BlackRock’s (BLK - Free Report) second-quarter 2018 adjusted earnings of $6.66 per share outpaced the Zacks Consensus Estimate of $6.60. Results benefited from an improvement in revenues, rise in assets under management and steady long-term inflows. However, an increase in operating expenses acted as a headwind.

The Blackstone Group L.P. (BX - Free Report) reported second-quarter 2018 economic net income (ENI) of 90 cents per share, which handily outpaced the Zacks Consensus Estimate of 71 cents. The quarter saw a substantial jump in revenues and growth in assets under management, which were mainly driven by inflows. However, rise in expenses was the undermining factor.

Ameriprise Financial Inc.’s (AMP - Free Report) second-quarter 2018 adjusted operating earnings per share of $3.60 comfortably surpassed the Zacks Consensus Estimate of $3.51. Results benefited from an improvement in revenues. Growth in AUM and assets under administration (AUA) also supported earnings. However, rise in expenses was an undermining factor.

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