On Mar 28, 2013, we reaffirmed our Neutral recommendation on
) based on its modest earnings performance, increasing asset
inflows and sound capital deployment actions. However,
continuously rising expenses, volatile U.S. dollar and higher
level of debt are likely to mar the profitability of this Zacks
Rank #3 (Hold) stock.
Why the Neutral Stance?
Though Invesco's fourth-quarter 2012 earnings fared better than
the prior quarter earnings, it had marginally missed the Zacks
Consensus Estimate. Lower-than-expected quarterly results came on
the back of an increase in operating costs, partly offset by
higher net revenue. Further, improved AUM and a stable balance
sheet position were the tailwinds.
In addition, in the past 60 days, there was a marginal downward
estimate revision for 2013. However, estimates for 2014 have
slightly improved over the same period.
Asset inflows at Invesco have witnessed increasing trends over
the past several quarters. With stabilizing equity markets, asset
inflows are anticipated to contribute significantly to earnings
growth. Also, Invesco is an asset for yield-seeking investors. In
Apr 2012, the company hiked its quarterly dividend by 41% over
the prior quarter to $0.1725 per share and maintained the same
level ever since. Moreover, in 2012, the company repurchased
shares worth $265.0 million and has nearly $467 million shares
left to be repurchased under its existing authorization.
Yet, elevated expenses remain a concern for Invesco. Though the
company has adopted a prudent approach to reduce its costs over
the last few years and intends to continue with its expense
management initiatives, the impact is not expected to be felt in
the near term. Further, the volatility in the financial markets
is expected to continue, in spite of signs of economic recovery,
which in turn could limit the upward potential of the company's
share price going forward.
Further, Invesco's high debt level might put the company in a
disadvantageous position if economic conditions worsen.
Other Stocks to Consider
Other stocks that are performing well and are worth considering
in the same sector include
Apollo Global Management, LLC
Affiliated Managers Group Inc.
). Apollo and Lazard hold a Zacks Rank #1 (Strong Buy) whereas
Affiliated Managers retains a Zacks Rank #2 (Buy).
AFFIL MANAGERS (AMG): Free Stock Analysis
APOLLO GLOBAL-A (APO): Free Stock Analysis
INVESCO LTD (IVZ): Free Stock Analysis Report
LAZARD LTD (LAZ): Free Stock Analysis Report
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