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Why Is Moelis (MC) Down 7.6% Since Last Earnings Report?

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It has been about a month since the last earnings report for Moelis (MC - Free Report) . Shares have lost about 7.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Moelis 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.

Moelis & Company Q4 Earnings Beat on Higher Revenues

Moelis & Company’s fourth-quarter adjusted earnings of 77 cents per share surpassed the Zacks Consensus Estimate of 67 cents. The earnings figure also reflects an improvement of 48% from the prior-year quarter.

The company’s quarterly performance benefited from growth in revenues as M&A activities continued to increase. However, higher expenses acted as a headwind.

Net income for the reported quarter (GAAP basis) was $56 million, compared to a loss of $5.7 million in the prior-year quarter.

Adjusted earnings per share for 2018 came in at $3.00, up 31% from the prior year. The figure also outpaced the Zacks Consensus Estimate of $2.92. Net income (GAAP Basis) for the year was $208 million compared with $126.5 million recorded in 2017.

Revenues Improve, Costs Rise

Total revenues for the quarter jumped 41% year over year to $238.3 million. This rise was mainly driven by strength in M&A-related activity and higher average fees per completed transaction. However, the top-line figure missed the Zacks Consensus Estimate of $240.4 million.

Total revenues for 2018 climbed 29% year over year to $885.8 million. The upside stemmed primarily from growth in all products, including capital markets and private fund advisory, with significant strength in M&A-related activity and higher average fees per completed transaction. Further, the reported figure outpaced the Zacks Consensus Estimate of $873.1 million.

Total operating expenses for the quarter (adjusted basis) came in at $174.2 million, rising 35% year over year. Increase in compensation and non-compensation costs led to this upswing.

Other income (adjusted basis) was $1.3 million, significantly lower than $10.1 million recorded in the year-ago quarter.

As of Dec 31, 2018, Moelis & Company had cash and liquid investments of $341.6 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -10.68% due to these changes.

VGM Scores

At this time, Moelis has a great Growth Score of A, though it is lagging a lot on the Momentum Score front 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Moelis has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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