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Eaton Vance (EV) Rallies 2.7% on Q3 Earnings Beat, Costs Up

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Shares of Eaton Vance Corp. (EV - Free Report) rallied 2.7% following the release of third-quarter fiscal 2019 (ended Jul 31) results. Adjusted earnings of 90 cents per share surpassed the Zacks Consensus Estimate of 87 cents. Also, the bottom line increased 10% year over year.

Results were driven by improvement in assets under management (AUM) balance and a slight rise in revenues. Further, the company’s liquidity position remained strong. However, higher operating expenses acted as a headwind.

Net income attributable to shareholders (GAAP basis) was $102.2 million, up marginally from the year-ago quarter figure of $101.8 million.

Revenues & Expenses Rise

Total revenues in the reported quarter were $431.2 million, up nearly 1% year over year. Rise in management fees and service fees were partially offset by lower distribution and underwriter fees, and other revenues. The top line lagged the Zacks Consensus Estimate of $433.5 million.

Total expenses increased 3% from the prior-year quarter to $294.1 million, largely due to higher amortization of deferred sales commissions.

Total operating income declined 4% year over year to $137.1 million.

Liquidity Position Strong, AUM Balance Improves

As of Jul 31, 2019, Eaton Vance had $527.7 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 $482.8 billion as of Jul 31, 2019. The reported quarter witnessed net inflows of $16.2 billion.

Share Repurchase Update

During first nine months of fiscal 2019, Eaton Vance repurchased and retired nearly 6.2 million shares of its Non-Voting Common Stock for $244.8 million under the company’s existing repurchase authorization.

As of Jul 31, 2019, nearly 7.6 million shares remained available under buyback authorization.

Our Viewpoint

Eaton Vance’s improving AUM balance and higher revenues are likely to support growth in the quarters ahead. However, increasing expenses might hamper its bottom line to quite an extent.

Eaton Vance Corporation Price, Consensus and EPS Surprise

Eaton Vance Corporation Price, Consensus and EPS Surprise

Eaton Vance Corporation price-consensus-eps-surprise-chart | 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

Blackstone (BX - Free Report) reported second-quarter distributable earnings of 57 cents, beating the Zacks Consensus Estimate of 50 cents. Results benefited from growth in AUM and lower expenses. However, a decline in revenues acted as a headwind.

BlackRock, Inc.’s (BLK - Free Report) second-quarter adjusted earnings of $6.41 per share lagged the Zacks Consensus Estimate of $6.52. Results were hurt by a decline in revenues along with higher expenses. Nevertheless, growth in AUM supported results to some extent.

Invesco (IVZ - Free Report) reported second-quarter 2019 adjusted earnings of 65 cents per share, beating the Zacks Consensus Estimate of 57 cents. Results benefited from improvement in AUM balance and rise in revenues, driven by the OppenheimerFunds buyout. However, increase in operating expenses and net outflows were the undermining factors.

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