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Eaton Vance (EV) Up on Q3 Earnings Beat, AUM Balance Rise

Eaton Vance Corp.’s EV shares increased marginally, following the release of third-quarter fiscal 2020 (ended Jul 31) results. Adjusted earnings of 82 cents per share outpaced the Zacks Consensus Estimate of 77 cents. However, the bottom line declined 7% year over year.

The results were driven by lower expenses and a rise in assets under management (AUM) balance. However, fall in revenues was an undermining factor.

Net loss attributable to shareholders (GAAP basis) was $1.6 million or 1 cent per share versus net income of $102.2 million or 90 cents per share in the prior year.

Revenues Down, Expenses Fall

Total revenues were $420.8 million, down 2% year over year. Fall in management fees and performance fees were the main reasons for lower revenues. However, revenues beat the Zacks Consensus Estimate of $403.2 million.

Total expenses decreased 2% from the prior-year quarter to $289.6 million. Lower compensation and related costs, fund-related expenses and distribution expenses were partially offset by higher service fee expense, amortization of deferred sales commissions, and other expenses.

Total operating income slid 4% year over year to $131.2 million.

Liquidity Position Strong, AUM Balance Up

As of Jul 31, 2020, Eaton Vance had $878.9 million in cash and cash equivalents compared with $557.7 million on Oct 31, 2019. The company had no borrowings outstanding under the $300-million credit facility.

Eaton Vance’s consolidated AUM rose 5% year over year to $507.4 billion as of Jul 31, 2020. The company recorded market price appreciation and net inflows.

Share Repurchase Update

During the first nine months of fiscal 2020, Eaton Vance repurchased and retired nearly 2.4 million shares of its Non-Voting Common Stock for $98.9 million under the company’s existing repurchase authorization.

As of Jul 31, 2020, nearly 4 million shares remained available under the buyback authorization.

Our Viewpoint

Eaton Vance’s decreasing expenses and solid AUM balance are expected to support its financials. However, muted top line is a concern.

Eaton Vance Corporation Price, Consensus and EPS Surprise

Eaton Vance Corporation Price, Consensus and EPS Surprise

Eaton Vance Corporation price-consensus-eps-surprise-chart | Eaton Vance Corporation Quote

Currently, Eaton Vance carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Asset Managers

SEI Investments Co.’s SEIC second-quarter 2020 earnings of 68 cents per share lagged the Zacks Consensus Estimate of 69 cents. Moreover, the figure reflects a decline of 17.1% from the prior-year quarter.

BlackRock, Inc.’s BLK second-quarter 2020 adjusted earnings of $7.85 per share comfortably surpassed the Zacks Consensus Estimate of $6.90. The figure also reflects a rise of 22.5% from the year-ago number.

Cohen & Steers’ CNS second-quarter 2020 adjusted earnings of 54 cents per share missed the Zacks Consensus Estimate of 55 cents. Moreover, the bottom line was 12.9% lower than the year-ago reported figure.

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