Eaton Vance Corp. (EV) offers strong growth and solid income at an attractive price.
And estimates have been rising after the company reported its results for the first quarter of 2012. It is a Zacks #2 Rank (Buy).
Eaton Vance is an investment management firm focusing on equity and fixed-income investments for tax-sensitive clients and closed-end funds. It had $191.7 billion in assets under management (:AUM) on January 31.
The company was founded in 1924 and has a market cap of $3.1 billion.
First Quarter Results
Eaton Vance reported its first quarter 2012 results on February 22. Adjusted earnings per share came in at 47 cents, beating the Zacks Consensus Estimate of 43 cents. It was a 4% increase over the same quarter in 2011.
Revenue declined 4% year-over-year to $295.6 million, but this was in-line with the Zacks Consensus Estimate.
Total expenses declined 3%, driven by lower Service Fee expenses and lower Amortization of Deferred Sales Commissions. Overall operating income was down 7%, but a 6% lower share count led to the EPS increase.
Following the company's Q1 results, analysts revised their estimates significantly higher for both 2012 and 2013, sending the stock to a Zacks #2 Rank (Buy).
Analysts expect positive fund flows to resume in the second quarter and throughout 2012, driving AUM and EPS higher.
The Zacks Consensus Estimate for 2012 is now $1.93, representing 11% growth over 2011 EPS. The 2013 consensus estimate is currently $2.18, corresponding with 13% growth.
In addition to double-digit earnings growth, the company pays a dividend that yields a solid 2.8%.
As you can see below, Eaton Vance has a history of steadily increasing its dividend, even during the financial crisis:
The valuation picture looks very reasonable with shares trading at just 13.1x 12-month forward earnings, well below its 10-year median of 18.0x.
Its price to book ratio of 6.4 is also below its historical median of 7.5.
The Bottom Line
With rising estimates, strong growth projections, a solid 2.8% yield and reasonable valuation, Eaton Vance offers attractive total return potential.
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