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Evercore (EVR) Stock Rises 8.5% on Q4 Earnings Beat, Costs Up

Zacks Equity Research

Shares of Evercore EVR gained 8.5% to close at $90.68 following fourth-quarter 2018 earnings release. The company delivered a positive earnings surprise of 71.6% in the reported quarter. Adjusted earnings per share of $3.93 surpassed the Zacks Consensus Estimate of $2.29. Also, the figure was significantly higher than the prior-year quarter’s earnings of $1.55 per share.

The results reflected top-line strength and rise in assets under management (AUM). Further, liquidity position was consistently strong. However, higher expenses were a major drag.

Including certain one-time items, on a GAAP basis, net income available to common shareholders was $163.3 million or $3.67 per share against loss of $19.4 million or 50 cents per share in the year-ago quarter.

Revenues Jump, Expenses Escalate

For 2018, net revenues increased 21% year over year to $2.06 billion. This rise was primarily owing to higher advisory fees (up 32%). On an adjusted basis, net revenues were $2.08 billion, up 26%.

Net revenues surged 43% year over year to $771.4 million in the quarter under review. The upsurge stemmed from escalated advisory fees (up 81%). On an adjusted basis, net revenues were $776.2 million, up 63%.

Total expenses mounted 46.4% to $521.2 million from the prior-year quarter. This downside was attributed to rise in almost all components of expenses.

Adjusted compensation ratio was 55% compared with 56% in the year-earlier quarter.

Adjusted operating margin came in at 34% compared with 28.2% a year ago.

Quarterly Segment Performance (Adjusted)

Investment Banking: Net revenues soared 65% year over year to $761.9 million. Also, operating income skyrocketed 102% to $260.2 million. Advisory client transactions were 309,000, up 26% from the year-ago quarter.

Investment Management: Net revenues were $14.3 million, down 13% from the comparable quarter last year. Operating income was $3.4 million compared with $5.2 million a year ago. However, AUM of $9.1 million was recorded in the fourth quarter, up 2%.  

Balance Sheet Position

As of Dec 31, 2018, cash, cash equivalents, marketable securities and certificates of deposit totaled $1.1 billion. Further, current assets exceeded current liabilities by $739.4 million as of the same date.

Capital Deployment

During 2018, Evercore returned $376.4 million to shareholders including share repurchases of common stock worth 3.1 million shares, the average price being $93.24. Notably, during the reported quarter, the company repurchased 1.2 million shares, the  average price being $85.35.

Our Viewpoint

Evercore reported an impressive quarter. Top-line strength depicts earnings stability. Further, the company’s strategic initiatives to bolster its investment banking segment bode well. Also, it remains well poised to undertake any opportunistic expansion given its sound liquidity position. However, rising expenses are a concern.

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 (Strong Buy) stocks here.

Performance of Other Investment Banks

Charles Schwab’s SCHW fourth-quarter 2018 earnings of 65 cents per share beat the Zacks Consensus Estimate of 64 cents. Also, earnings augmented 59% from the prior-year quarter. Revenue growth (driven by higher interest income and trading revenues) and absence of fee waivers aided the results. However, higher expenses are a drag. Further, the quarter recorded a fall in total client assets.

Weak trading and underwriting performance affected Morgan Stanley’s MS fourth-quarter 2018 adjusted earnings of 73 cents per share, which lagged the Zacks Consensus Estimate of 90 cents. The figure also reflected 13% decline from the prior-year quarter. Dismal underwriting (both equity and fixed income) revenues (down 25%) and fixed income trading revenues (down 30%) hurt Morgan Stanley’s quarterly results. Additionally, net interest income decreased.

TD Ameritrade Holding Corp. AMTD delivered a positive earnings surprise of 11% in first-quarter fiscal 2019 (ending Dec 31). The company reported earnings of $1.11 per share, significantly surpassing the Zacks Consensus Estimate of $1.00. Moreover, the figure ascended 39% from the prior-year quarter.

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