On May 22, we issued an updated research report on Invesco Ltd. (IVZ - Free Report) . The company’s strong balance sheet position along with improving assets under management (AUM) and diverse product offerings is likely to continue supporting growth. However, the use of high debt along with elevated expenses remains major near-term concerns.
The Zacks Consensus Estimate for the company’s current-year earnings has remained unchanged over the past seven days, reflecting that analysts are not very optimistic regarding its earnings growth potential. Thus, the stock currently carries a Zacks Rank #3 (Hold).
The company’s price performance does not seem very impressive. Its shares have lost 26.7% over the past year compared with 14.7% decline of the industry.
Looking at its fundamentals, net revenues have witnessed a five-year (2014-2018) CAGR of 1.4%, mainly driven by solid AUM balance. The company’s diverse product offerings and alternative investment strategies are likely to continue to attract investors. Moreover, given a robust institutional pipeline, along with a solid retail channel, the company will likely witness decent revenues.
While Invesco’s total AUM declined in 2018, it recorded a CAGR of 2.9% over the last five years (2014-2018). The uptrend continued in the first three months of 2019 as well. Notably, the deal to acquire OppenheimerFunds Inc. will likely result in further rise in the company’s AUM, making it one of the leading global asset managers.
Further, driven by a strong balance sheet position and consistently improving earnings, Invesco is expected to continue enhancing shareholder value through efficient capital deployment activities.
However, the company’s expenses increased at a three-year CAGR of 7.5% (2016-2018), mainly due to rise in compensation costs and marketing expenses. While it is undertaking measures that are likely to boost efficiency, operating expenses might rise in the quarters ahead, given its inorganic growth efforts and investment in franchise.
Also, high debt levels could restrict it from procuring additional finance for working capital, capital expenditure, acquisitions, debt service requirements or other purposes. High debt obligation, if combined with unfavorable economic and industry conditions, can drag the company to a relatively disadvantageous position.
Stocks to Consider
Some better-ranked stocks from the finance space are Cohen & Steers, Inc. (CNS - Free Report) , BlackRock, Inc. (BLK - Free Report) and Franklin Resources, Inc. (BEN - Free Report) . All these stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the past 60 days, Cohen & Steers has witnessed an upward earnings estimate revision of 6.9% for 2019. Its share price has risen 37.9% over the past six months.
The Zacks Consensus Estimate for BlackRock’s current-year earnings has been revised 5.7% upward over the past 60 days. Its share price has increased 4.9% over the past six months.
Franklin Resources has witnessed an upward earnings estimate revision of 8.9% for fiscal 2019 over the past 60 days. Its share price has improved nearly 1% over the past six months.
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