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Eaton Vance (EV) Jumps 7.6% on Q2 Earnings & Revenue Beat

Zacks Equity Research

Shares of Eaton Vance Corp. EV jumped 7.6% following the release of second-quarter fiscal 2019 (ended Apr 30) results. Adjusted earnings of 89 cents per share handily surpassed the Zacks Consensus Estimate of 76 cents. Also, the bottom line increased 16% year over year.

Results were driven by improvement in assets under management (AUM) balance and a slight rise in management fees. Further, the company’s liquidity position remained strong. However, a slight fall in revenues and higher operating expenses were headwinds.

Net income attributable to shareholders (GAAP basis) was $101.8 million, up 5% from the year-ago quarter.

Revenues Decline, Expenses Rise

Total revenues in the reported quarter were $411.9 million, down marginally year over year. Rise in management fees and stable service fees were more than offset by lower distribution and underwriter fees, and other revenues. However, the top line beat the Zacks Consensus Estimate of $405.7 million.

Total expenses increased 2% from the prior-year quarter to $284.7 million, largely due to higher amortization of deferred sales commissions.

Total operating income declined 4% year over year to $127.2 million.

Liquidity Position Strong, AUM Balance Improves

As of Apr 30, 2019, Eaton Vance had $525 million in cash and cash equivalents compared with $600.7 million on Oct 31, 2018. The company had no borrowings outstanding against its $300-million credit facility.

Eaton Vance’s consolidated AUM grew 7% year over year to $469.9 billion as of Apr 30, 2019. The reported quarter witnessed net inflows of $11.9 billion.

Share Repurchase Update

During first-half fiscal 2019, Eaton Vance repurchased and retired nearly 4.7 million shares of its Non-Voting Common Stock for $183.5 million under the company’s existing repurchase authorization.

As of Apr 30, 2019, nearly 2.6 million shares remained available under buyback authorization.

Our Viewpoint

Eaton Vance’s improving AUM along with higher revenues will likely support growth in the quarters ahead. However, escalating expenses might hamper its bottom-line growth to quite an extent.

Eaton Vance Corporation Price, Consensus and EPS Surprise

 

Eaton Vance Corporation Price, Consensus and EPS Surprise

Eaton Vance Corporation price-consensus-eps-surprise-chart | Eaton Vance Corporation Quote

Currently, Eaton Vance carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Investment Managers

BlackRock, Inc.’s BLK first-quarter 2019 adjusted earnings of $6.61 per share surpassed the Zacks Consensus Estimate of $6.20. However, the figure was 1.3% lower than the year-ago quarter’s number.

Blackstone BX reported first-quarter 2019 distributable earnings of 44 cents, lagging the Zacks Consensus Estimate of 52 cents. However, the figure reflects improvement from 41 cents earned in the prior-year quarter.

Cohen & Steers’ CNS first-quarter 2019 adjusted earnings came in at 58 cents per share, missing the Zacks Consensus Estimate by a penny. Also, the bottom line was 6.5% lower than the year-ago quarter figure.

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