Revenue Pressure, High Level of Goodwill to Hurt Invesco (IVZ)
Invesco Ltd. IVZ is expected to continue witnessing revenue-growth pressure amid a challenging operating backdrop. Considerably high levels of goodwill and intangible assets on the company's balance sheet make us apprehensive.
Analysts also do not seem optimistic regarding its earnings growth potential. Over the past 30 days, the Zacks Consensus Estimate for IVZ’s current-year earnings has been revised 1.4% lower. Thus, it currently carries a Zacks Rank #4 (Sell).
In the past six months, shares of IVZ have gained 7.5% compared with the industry's 18.4% growth.
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Looking at its fundamentals, while Invesco’s total operating revenues witnessed a five-year (2017-2022) compound annual growth rate (CAGR) of 3.2%, the metric has been recording a downtrend since the second half of 2020.
Despite having a robust institutional pipeline, diverse product offerings and alternative investment strategies, solid retail channels and synergies from opportunistic acquisitions, IVZ’s revenues are likely to remain under pressure in the near term. We anticipate operating revenues to decline 4.9% in 2023 and 0.3% in 2024.
Goodwill and intangible assets on Invesco's balance sheet are subject to annual impairment reviews. As of Sep 30, 2023, goodwill and net intangible assets remained considerably high, totaling $15.7 billion (53.2% of total assets). Several factors may initiate the impairment of the book value of such assets, due to which their value may have to be written down. This will affect the firm’s financials.
Further, while its expense levels have been manageable, we project total expenses (adjusted) to rise 1.6% in 2023, which might create a near-term headwind.
Nevertheless, synergies from buyouts, diverse product offerings and alternative investment strategies, global presence and solid assets under management balance are expected to keep aiding IVZ’s financials.
Stocks Worth a Look
A couple of stocks from the same space worth considering are Prospect Capital Corporation PSEC and Capital Southwest Corporation CSWC.
Prospect Capital currently sports a Zacks Rank #1 (Strong Buy). Its earnings estimates for the current fiscal year have been revised 8.1% upward over the past 60 days. In the past three months, PSEC shares have gained 1.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings estimates for Capital Southwest have been revised 2.7% upward for the current fiscal year over the past 60 days. Shares of CSWC have rallied 8% in the past three months. Currently, the company carries a Zacks Rank #2 (Buy).
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Invesco Ltd. (IVZ) : Free Stock Analysis Report
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