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Why Is Evercore (EVR) Up 5.3% Since Last Earnings Report?

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A month has gone by since the last earnings report for Evercore (EVR - Free Report) . Shares have added about 5.3% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Evercore due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Evercore Q1 Earnings Beat Estimates

Evercore reported first-quarter 2020 adjusted earnings per share of $1.21, beating the Zacks Consensus Estimate of $1.03. However, results were down 27% from the prior-year quarter’s $1.66 per share.

The quarterly results reflect higher revenues. In addition, liquidity position was consistently strong. However, escalating expenses and fall in AUM were major drags, increasing investors’ concerns. Hence, following the results, shares of the company declined 5.9%.

Including certain one-time items, on a GAAP basis, net income available to common shareholders was $31.2 million or 74 cents per share compared with $67.2 million or $1.52 per share in the year-ago quarter.

Revenues Increase, Expenses Rise

Net revenues increased 4% year over year to $435 million in the reported quarter. This upside resulted from a hike in advisory fees (up 10%), along with commissions and trades (32%). The figure also surpassed the Zacks Consensus Estimate of $420 million. On a GAAP basis, net revenues were $427 million, up 3%.

Total expenses flared up 14% to $365 million from the prior-year quarter. This upswing mainly stemmed from rise in employee compensation and benefits expenses.

Adjusted compensation ratio was 62%, up from the year-earlier quarter’s 58%.

Adjusted operating margin came in at 19% compared with the prior-year quarter’s 22.8%.

Quarterly Segment Performance (Adjusted)

Investment Banking: Net revenues jumped 4% year over year to $419 million. Yet, operating income slid 14% to $79.2 million. Advisory client transactions were 222,000, up 2% year over year.

Investment Management: Net revenues were $15.9 million, down 1% from the prior year’s comparable quarter. Operating income was $3.3 million, down 15% year over year. Additionally, an AUM of $9.5 million was reported in the first quarter, down 2% year over year.  

Balance-Sheet Position

As of Mar 31, 2020, cash, cash equivalents, marketable securities and certificates of deposit totaled $852.3 million. Moreover, current assets exceeded current liabilities by $879.6 million as of the same date.

Capital Deployment

During the March-end quarter, the company repurchased 0.8 million shares at an average cost of $76.02 per share.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -48.6% due to these changes.

VGM Scores

At this time, Evercore has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Evercore has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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