Invesco Ltd.
's (
IVZ
) third quarter adjusted earnings came in at 42 cents per share,
marginally missing the Zacks Consensus Estimate of 44 cents. Yet,
this compares favorably with adjusted earnings of 41 cents
recorded in the previous quarter.
Invesco's lower-than-expected results were attributable to a rise
in operating costs, partly offset by higher net revenue. Further,
improved assets under management (AUM) and stable balance sheet
position were the tailwinds.
On a GAAP basis, net income was $170.6 million or 38 cents per
share, up from $153.9 million or 34 cents in the prior quarter.
Behind the Headlines
Adjusted net revenue surged 3.2% sequentially to $734.7 million.
Increases in investment management fees as well as service and
distribution fees were partially offset by fall in performance
fees and other revenue. However, net revenue was nowhere near the
Zacks Consensus Estimate of $1.1 billion.
Adjusted operating expenses escalated 4.6% from the prior quarter
to $484.3 million. The increase was primarily attributable to
higher employee compensation expenses, partly mitigated by lower
marketing expenses as well as decline in general and
administrative expenses.
Adjusted operating margin for the quarter was 34.1%, down from
35.0% in the prior quarter.
Assets under Management
As of September 30, 2012, AUM rose 5.6% sequentially to $683.0
billion, reflecting net market gains and favorable foreign
exchange rate changes. Average AUM for the reported quarter was
$667.9 billion, up 2.6% from $651.2 billion in the prior quarter.
Long-term net inflows during the quarter were $9.4 billion
compared with long-term net outflows of $4.9 billion in the
preceding quarter.
Balance Sheet
As of September 30, 2012, cash and cash equivalents were $880.1
million compared with $727.4 million as of December 31, 2011.
Total debt was $1,285.1 million as of September 30, 2012, against
$1,284.7 million as of December 31, 2011.
Additionally, credit facility balance was $754.5 million as of
September 30, 2012, as against $811.0 million as of June 30,
2012.
Share Repurchase Update
During the reported quarter, Invesco repurchased $40 million
worth of shares, representing 1.8 million shares at an average
price of $22.16 per share. Hence, for the first nine months of
2012, the company repurchased shares worth $190 million.
Dividend Update
Concurrent with the earnings release, the company declared
third-quarter dividend of 17.25 cents per share. The dividend
will be paid on December 7, to shareholders of record as of
November 19.
Peer Performance
T. Rowe Price Group Inc.
's (
TROW
) third quarter earnings exceeded the Zacks Consensus Estimate.
Higher-than-expected top-line growth and increased assets under
management were the positives for the quarter. However, elevated
operating expenses acted as a dampener.
Our Viewpoint
Invesco's long-term investment performance was boosted by an
uptrend in the global equity markets, which likewise is
envisioned to uplift the company's operating results.
Moreover, the operating leverage is expected to improve
significantly over the long term due to Invesco's cost-control
initiatives.
Invesco is well-positioned to benefit from improved global
investment flows, resulting from its broad diversification.
However, volatile U.S. dollar and increasing competition remain
the major areas of concern.
Invesco currently retains a Zacks #2 Rank, which translates into
a short-term Buy rating. However, considering the fundamentals,
we also maintain a 'Neutral' recommendation on the stock.
INVESCO LTD (IVZ): Free Stock Analysis Report
T ROWE PRICE (TROW): Free Stock Analysis
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