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Eaton Vance (EV) Stock Up Despite Q1 Earnings, Revenues Lag

Zacks Equity Research
Updated

Eaton Vance Corp. EV reported first-quarter fiscal 2017 (ended Jan 31) adjusted earnings of 53 cents per share, which lagged the Zacks Consensus Estimate of 58 cents. Also, earnings were 6% above the prior-year quarter.

Despite the earnings miss, shares of Eaton Vance gained nearly 6.2% following the release of its results, before the market opened, because of investors being optimistic on its revenue growth. Quarterly results were hurt by a rise in expenses, partially offset by higher revenues. However, growth in assets under management (AUM) and robust net inflows were the tailwinds.

Net income attributable to shareholders in the reported quarter grew 4% year over year to $60.7 million.

Revenues & Expenses Witness a Rise

Total revenue for the quarter amounted to $355 million, up 7.1% year over year. The rise was mainly driven by higher management, performance, and distribution and service fees. However, the figure surpassed the Zacks Consensus Estimate of $354 million.

Total expenses rose 8.1% year over year to $249.5 million in the reported quarter. The increase was largely due to higher compensation and related costs, and fund-related expenses partially offset by decrease in amortization of deferred sales commissions and other operating expenses.

Total operating income was up 4.8% on a year-over-year basis to $105.4 million.

Liquidity Position Weakens & AUM Improves

As of Jan 31, 2017, Eaton Vance had $320.1 million in cash and cash equivalents compared with $424.2 million as of Oct 31, 2016. Further, the company had no borrowings outstanding against its new $300-million credit facility.

Eaton Vance’s consolidated AUM grew 20.2% year over year to $363.7 billion, reflecting net inflows of $7.8 billion and market price appreciation of $9.6 billion.

Share Repurchase

During the fiscal first quarter, Eaton Vance repurchased nearly 1.3 million shares of its Non-Voting Common Stock for $53.6 million under its existing repurchase authorization.

Our Viewpoint

Eaton Vance’s improving AUM along with revenue growth shall support its growth in the quarters ahead. Also, the acquisition of Calvert Investments shall improve the company’s financials, going forward. However, rising expenses keep us apprehensive.

Eaton Vance Corporation Price, Consensus and EPS Surprise

 

Eaton Vance Corporation Price, Consensus and EPS Surprise | Eaton Vance Corporation Quote

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Eaton Vance currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Asset Managers

BlackRock, Inc. BLK reported fourth-quarter 2016 adjusted earnings of $5.14 per share, which handedly surpassed the Zacks Consensus Estimate of $5.02. Earnings were better than expected primarily due to a decline in total expenses. Also, higher revenues acted as tailwind.

Waddell & Reed Financial Inc. WDR reported fourth-quarter 2016 adjusted earnings of 48 cents per share, easily surpassing the Zacks Consensus Estimate of 41 cents. Better-than-expected results were mainly driven by lower expenses. A decline in revenues and lower AUM were the other undermining factors.

Ameriprise Financial Inc.’s AMP fourth-quarter 2016 operating earnings per share of $2.73 easily surpassed the Zacks Consensus Estimate of $2.43. Results were better than expected primarily due to a decline in expenses. Also, growth in AUM and assets under administration (“AUA”) were on the positive side. However, a fall in top line hurt the results to some extent.

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Waddell & Reed Financial, Inc. (WDR): Free Stock Analysis Report
 
AMERIPRISE FINANCIAL SERVICES, INC. (AMP): Free Stock Analysis Report
 
BlackRock, Inc. (BLK): Free Stock Analysis Report
 
Eaton Vance Corporation (EV): Free Stock Analysis Report
 
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