Eaton Vance Gains on Earnings Beat - Analyst Blog
Share price of
Eaton Vance Corp.
) increased nearly 6% on Wednesday following its second-quarter
fiscal 2014 adjusted earnings (ended Apr 30) of 59 cents per share,
which surpassed the Zacks Consensus Estimate of 56 cents. Further,
this was 13% above the year-ago figure of 52 cents.
Better-than-expected results were attributable to the increase in revenues, partially offset by mounting operating expenses. Additionally, an impressive rise in assets under management (AUM) and improved balance sheet were the tailwinds.
Eaton Vance's net income grew 10% year over year to $78.0 million in the quarter.
Performance in Detail
Eaton Vance's total revenue came in at $354.1 million, up 7% year over year. The rise was primarily driven by increase in investment advisory and administrative fees and other revenues. These were partly offset by lower distribution and underwriter fees as well as service fees. Also, the figure was almost in line with the Zacks Consensus Estimate of $354.0 million.
Total expenses climbed 2% from the prior-year quarter to $228.8 million. The rise was mainly due to higher compensation and related costs as well as fund-related expenses.
Total operating income for the quarter grew 16% year over year to $125.3 million.
As of Apr 30, 2014, Eaton Vance had $311.9 million in cash and cash investments as compared with $461.9 million as of Oct 31, 2013. Further, the company had no borrowings outstanding against its $300 million credit facility.
Assets Under Management
During the reported quarter, consolidated AUM rose 10% year over year to $285.9 billion, reflecting net inflows of $10.7 billion and market appreciation of $14.9 billion.
As of Apr 30, 2014, long-term fund AUM was $134.9 billion, up 6% year over year. Moreover, institutional AUM came in at $96.6 billion, reflecting a 14% increase from the year-ago quarter. Further, high net worth AUM rose 16% year over year to $21.0 billion while retail AUM was $33.2 billion, up 9% from the year-ago quarter.
During the first half of fiscal 2014, Eaton Vance repurchased nearly 3.5 million shares of its Non-Voting Common Stock for $135.3 million under its repurchase authorization. The company has a share repurchase authorization of 8.0 million, out of which around 5.3 million shares remain outstanding.
Eaton Vance is expected to benefit from increased investments in the near term. Also, the growing need for risk management and alternative investment solutions within the financial service industry will likely be accretive to the company's financials going forward. We believe that the company's diversified revenue mix and footprint, along with steadily increasing AUM will drive growth in the future.
However, we remain concerned about the adverse effects of the present capital market volatility on the company's financial performance in the near term.
Eaton Vance currently carries a Zacks Rank #3 (Hold).
Performance of Other Asset Managers
Among other investment management firms, The Blackstone Group L.P. ( BX ), BlackRock, Inc. ( BLK ) and Ameriprise Financial Inc. ( AMP ) outpaced the Zacks Consensus Estimate in their latest earnings releases. Their results were driven by improvement in top line, partially offset by higher expenses. Further, all three companies have recorded impressive AUM growth.
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