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Eaton Vance's (EV) Q3 Earnings In-Line, Stock Rises 2.3%

Zacks Equity Research

Eaton Vance Corp.’s EV third-quarter fiscal 2016 (ended Jul 31) adjusted earnings of 56 cents per share came in line with the Zacks Consensus Estimate. However, earnings were 2% below the prior-year quarter.

Results primarily benefited from a fall in expenses. Further, growth in assets under management (AUM) and robust net inflows perhaps led to the stock rising 2.3%. However, decrease in revenues acted as an undermining factor.

Net income attributable to shareholders declined 8% year over year to $62.9 million.
 

 

Revenues & Expenses Witness a Decline

Total revenue for the quarter amounted to $341.2 million, down 4% year over year. The decline was due to a fall in all revenue components. Moreover, the figure lagged the Zacks Consensus Estimate of $344.0 million.

Total expenses fell 2% year over year to $234.4 million in the reported quarter. The fall was largely driven by a decrease in service fee expenses, fund-related costs and compensation and related costs.

Total operating income plunged 9% year over year to $106.7 million.

Liquidity Position Weakens & AUM Improves

As of Jul 31, 2016, Eaton Vance had $378.2 million in cash and cash equivalents compared with $465.6 million as of Oct 31, 2015. Further, the company had no borrowings outstanding against its new $300-million credit facility.

Eaton Vance’s consolidated AUM grew 7% year over year to $334.4 billion, reflecting net inflows of $19.0 billion and market price appreciation of $2.8 billion.

Share Repurchase

During the first nine months of fiscal 2016, Eaton Vance repurchased nearly 6.1 million shares of its Non-Voting Common Stock for $205.0 million under its existing repurchase authorization.

Our Viewpoint

Rising demand for risk management and alternative investment solutions within the financial services industry will likely support the Eaton Vance’s financials. Going forward, favorable market movement and positive organic revenue growth will help the company sustain profitability. However, the company’s NextShares initiative continues to push costs up.

EATON VANCE Price, Consensus and EPS Surprise

 

 

EATON VANCE Price, Consensus and EPS Surprise | EATON VANCE Quote

Eaton Vance currently holds a Zacks Rank #2 (Buy).

Performance of Other Asset Managers

BlackRock, Inc.’s BLK second-quarter 2016 adjusted earnings of $4.78 per share lagged the Zacks Consensus Estimate by a penny. Lower-than-expected quarterly results were due to a decrease in adjusted operating income. However, efficient cost containment was on the positive side.

Affiliated Managers Group Inc.’s AMG second-quarter 2016 economic earnings of $3.06 per share surpassed the Zacks Consensus Estimate of $3.01. Results exhibited a fall in revenues, partially offset by a decrease in operating expenses. Notably, growth in AUM led by marginal net inflows acted as a tailwind.

Invesco Ltd.’s IVZ second-quarter 2016 adjusted earnings of 56 cents per share surpassed the Zacks Consensus Estimate by a penny. Decline in operating expenses largely benefited the results. However, soft revenues as well as weakness in AUM were the undermining factors.

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