Evercore (EVR) Stock Declines 5% Despite Q3 Earnings Beat
Evercore EVR delivered a positive earnings surprise of 21.8% in third-quarter 2018. Adjusted earnings per share of $1.23 surpassed the Zacks Consensus Estimate of $1.01. Also, the figure was a penny higher than the prior-year quarter.
The company reports adjusted results after considering the impact of certain Evercore LP Units along with acquisition-related and special charges.
Shares of Evercore declined about 5% in full-day trading session after it reported results on Oct 24, before market opened. The price performance is reflective of investors’ reaction to year-over-year decline in revenues, led by lower advisory fees.
Nevertheless, results benefited from decline in expenses and rise in assets under management (AUM). Further, liquidity position continues to remain strong.
On GAAP basis, net income available to common shareholders was $49.5 million or $1.08 per share compared with $45.9 million or $1.04 in the year-ago quarter.
Decline in Revenues Offset by Lower Expenses
Net revenues declined 8.1% year over year to $381.3 million. The fall was primarily due to lower advisory fees (down 9%). On an adjusted basis, net revenues were $376 million, down 7%.
Total expenses fell 4% to $306.7 million from the prior-year quarter. The decline was attributed to lower compensation and benefit expenses.
Operating margin came in at 19.6% compared with 21.4% recorded a year ago.
Quarterly Segment Performance (on adjusted basis)
Investment Banking: Net revenues decreased 6% year over year to $359.3 million. Also, operating income fell 17% to $81.3 million. Advisory client transactions were 196,000, down 7% from the year-ago quarter.
Investment Management: Net revenues were $16.7 million, down 17% from the prior-year quarter. Operating income was $5.7 million compared with $6.2 million a year ago. However, AUM of $9.9 million was recorded in the third quarter, up 10%.
Balance Sheet Position
As of Sep 30, 2018, cash, cash equivalents and marketable securities totaled $736.3 million. Further, current assets exceeded current liabilities by $624.1 million as of the same date.
Our Viewpoint
Evercore’s third-quarter results do not seem that impressive. The company reported decline in revenues due to limited capital market activity.
However, the company’s strategic initiatives to bolster the investment banking segment bode well. Also, it remains well poised to undertake any opportunistic expansions given its sound liquidity position.
Evercore Inc Price, Consensus and EPS Surprise
Evercore Inc Price, Consensus and EPS Surprise | Evercore Inc Quote
Currently, Evercore carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Performance of Other Investment Banks
TD Ameritrade Holding Corporation AMTD recorded a positive earnings surprise of 12.7% in third-quarter fiscal 2018 (ending Jun 30). The company reported earnings of 89 cents per share, significantly beating the Zacks Consensus Estimate of 79 cents. Moreover, results were up 85% from the prior-year quarter.
Reflecting the highest strong year-to-date net revenues in eight years, Goldman Sachs’ GS third-quarter 2018 results recorded a positive earnings surprise of 15.9%. The company reported earnings per share of $6.28, comfortably beating the Zacks Consensus Estimate of $5.42. Further, the bottom line witnessed 25.1% year-over-year improvement.
E*TRADE Financial ETFC delivered a positive earnings surprise of 20.5% in third-quarter 2018. Earnings of $1.00 per share comfortably surpassed the Zacks Consensus Estimate of 83 cents. Moreover, the results, including certain one-time items, compared favorably with 49 cents recorded in the prior-year quarter.
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