Why Is Eaton Vance (EV) Down 0.8% Since Last Earnings Report?
A month has gone by since the last earnings report for Eaton Vance (EV). Shares have lost about 0.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Eaton Vance due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Eaton Vance Q3 Earnings Beat Estimates, Revenues & AUM Improve
Eaton Vance’s third-quarter fiscal 2018 (ended Jul 31) adjusted earnings of 82 cents per share surpassed the Zacks Consensus Estimate of 81 cents. Also, the bottom line was 32% higher than the prior-year quarter’s tally.
Higher revenues and growth in AUM on a year-over-year basis supported the results. Further, the company’s liquidity position remained strong. However, rise in operating expenses was a headwind.
Net income attributable to shareholders (GAAP basis) was $101.8 million or 83 cents per share, up from $67.4 million or 58 cents per share in the year-ago quarter.
Revenues Rise, Expenses Flare Up
Total revenues were $430.6 million, up 9% year over year. This upside was primarily driven by higher management fees and other revenues. However, the top line marginally lagged the Zacks Consensus Estimate of $430.8 million.
Total expenses increased 6% from the prior-year quarter to $288.3 million, largely due to higher compensation and related costs, fund-related expenses, amortization of deferred sales commissions, and other expenses.
Total operating income grew 18% year over year to $142.3 million.
Liquidity Position Strong, AUM Improves
As of Jul 31, 2018, Eaton Vance had $562.9 million in cash and cash equivalents compared with $610.6 million as of Oct 31, 2017. Further, the company had no borrowings outstanding against its $300-million credit facility.
Eaton Vance’s consolidated AUM increased 12% from the year-ago quarter to $453.2 billion, reflecting net inflows of $23.2 billion and a market price appreciation of $24.4 billion.
Share Repurchase
During the first nine months of fiscal 2018, Eaton Vance repurchased nearly 3.4 million shares of its Non-Voting Common Stock for $186.1 million under the company’s existing repurchase authorization.
Outlook
Management expects effective tax rate to be 27.25% for fourth quarter of fiscal 2018 and 27.75% for fiscal 2018. Also, tax rate for fiscal 2019 has been anticipated to be 25.3%-25.8%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Eaton Vance has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Eaton Vance has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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