A month has gone by since the last earnings report for Invesco (IVZ - Free Report) . Shares have added about 0.8% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Invesco 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.
Invesco Q3 Earnings Beat on Higher Revenues & Assets
Invesco reported third-quarter 2019 adjusted earnings of 70 cents per share, beating the Zacks Consensus Estimate of 57 cents. Also, the bottom line was 6.1% up from the prior-year quarter figure.
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.
On a GAAP basis, net income attributable to common shareholders was $167.1 million or 36 cents per share, down from $269.6 million or 65 cents per share a year ago.
Revenues & Expenses Rise
GAAP operating revenues were $1.72 billion, increasing 28.2% year over year. However, the figure missed the Zacks Consensus Estimate of $1.76 billion. Adjusted net revenues jumped 27.1% to $1.23 billion.
Adjusted operating expenses were $726.1 million, up 19.2% from the prior-year quarter.
At the end of the third quarter, Invesco achieved $501 million in annualized net expense synergies related to integration of the OppenheimerFund business. This is in excess of its target of $475 million, and also ahead of original schedule.
Adjusted operating margin for the quarter was 40.9% compared with 37.0% a year ago.
As of Sep 30, 2019, AUM was $1.18 trillion, up 20.7% year over year. Average AUM for the third quarter totaled $1.19 trillion, up 20.6%. AUM growth was mainly driven by the closure of the deal to acquire OppenheimerFunds in May 2019.
Further, the September quarter witnessed long-term net outflows of $11.1 billion.
Share Repurchase Update
During the third quarter, Invesco repurchased shares worth $315 million.
The company repurchased $962 million worth of shares since announcing $1.2 billion buyback authorization in October 2018. Further, Invesco is on track to repurchase the remaining $238 million by the first quarter of 2021.
The company expects 2020 expense run rate of nearly $2.9 billion, post synergies from the OppenheimerFunds buyout.
By the second half of 2020, the earnings power of the combined firm will likely reach the targeted $1 billion of cash, which is well above the regulatory capital requirements. Also, the combined organization is anticipated to have an annual EBITDA of more than $2.6 billion, by the end of 2020, post synergies.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 5.82% due to these changes.
Currently, Invesco has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Invesco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.