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Eaton Vance (EV) Up 9.7% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Eaton Vance (EV - Free Report) . Shares have added about 9.7% 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 drivers.

Eaton Vance Q3 Earnings Beat Estimates, Costs Increase

Eaton Vance’s third-quarter fiscal 2019 (ended Jul 31) 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 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 under 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.

Outlook

Effective tax rate for fiscal 2019 is anticipated to be 25.9-26.4%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Eaton Vance has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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

Eaton Vance has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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