A month has gone by since the last earnings report for Invesco (IVZ). Shares have lost about 0.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Invesco due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Invesco Misses on Q2 Earnings as Revenues & AUM Fall
Invesco reported second-quarter 2020 adjusted earnings of 35 cents per share, missing the Zacks Consensus Estimate of 42 cents. Also, the bottom line declined 46.2% from the prior-year quarter.
Increase in operating expenses, lower revenues and net outflows were the major undermining factors amid coronavirus scare. Yet, a strong liquidity position was a tailwind.
On a GAAP basis, net income attributable to common shareholders came in at $40.5 million or 9 cents per share compared with $40.1 million or 9 cents per share a year ago.
Revenues Down, Expenses Rise
GAAP operating revenues were $1.42 billion, which decreased 1.4% year over year. Also, the figure missed the Zacks Consensus Estimate of $1.49 billion.
Adjusted net revenues declined 9.7% from the prior-year quarter to $1.03 billion. The fall was mainly due to significant market volatility.
Adjusted operating expenses were $674.6 million, up nearly 1% from the prior-year quarter.
Adjusted operating margin was 34.8%, down from 35.2% a year ago.
As of Jun 30, 2020, cash and cash equivalents were $987.1 million, up 5% sequentially. Further, long-term debt amounted to $2.41 billion, including the credit facility balance of $325.6 million.
AUM Balance Declines
As of Jun 30, 2020, AUM was $1.15 billion, which decreased 4.4% year over year. Average AUM at second quarter-end totaled $1.12 billion, up 5.9% from the year-ago period.
The company witnessed long-term net outflows of $14.2 billion.
Management expects revenues to remain under pressure in the near term as outflows continue to hurt AUM balance.
The company expects quarterly operating expenses to be around $675 million for the remainder of 2020. Marketing expenses are projected to modestly increase in the third quarter on a sequential basis.
Given the mix shift in AUM, including the impact of larger, lower fee institutional mandates, it expects a continued modest decline in net revenue yield (excluding performance fees) in the third quarter.
For the remaining quarters of 2020, effective tax rate is expected between 24% and 25%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
At this time, Invesco has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Invesco has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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