A month has gone by since the last earnings report for Eaton Vance . Shares have added about 4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Eaton Vance due for a pullback? 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.
Eaton Vance Q2 Earnings & Revenue Beat Estimates, Costs Up
Eaton Vance’s second-quarter fiscal 2019 (ended Apr 30) adjusted earnings of 89 cents per share handily surpassed the Zacks Consensus Estimate of 76 cents. Also, the bottom line increased 16% year over year.
Results were driven by improvement in assets under management (AUM) balance and a slight rise in management fees. Further, the company’s liquidity position remained strong. However, a slight fall in revenues and higher operating expenses were headwinds.
Net income attributable to shareholders (GAAP basis) was $101.8 million, up 5% from the year-ago quarter.
Revenues Decline, Expenses Rise
Total revenues in the reported quarter were $411.9 million, down marginally year over year. Rise in management fees and stable service fees were more than offset by lower distribution and underwriter fees, and other revenues. However, the top line beat the Zacks Consensus Estimate of $405.7 million.
Total expenses increased 2% from the prior-year quarter to $284.7 million, largely due to higher amortization of deferred sales commissions.
Total operating income declined 4% year over year to $127.2 million.
Liquidity Position Strong, AUM Balance Improves
As of Apr 30, 2019, Eaton Vance had $525 million in cash and cash equivalents compared with $600.7 million on Oct 31, 2018. The company had no borrowings outstanding against its $300-million credit facility.
Eaton Vance’s consolidated AUM grew 7% year over year to $469.9 billion as of Apr 30, 2019. The reported quarter witnessed net inflows of $11.9 billion.
During first-half fiscal 2019, Eaton Vance repurchased and retired nearly 4.7 million shares of its Non-Voting Common Stock for $183.5 million under the company’s existing repurchase authorization.
Effective tax rate for fiscal 2019 is anticipated to be 25.9-26.4%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, Eaton Vance has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Eaton Vance has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.