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Invesco (IVZ) Q1 Earnings & Revenues Lag, Dividend Raised

Invesco Ltd. IVZ reported first quarter 2016 adjusted earnings of 49 cents per share, missing the Zacks Consensus Estimate of 54 cents. Also, the bottom line came in 22.2% below the prior-year tally.


Lower-than-expected results were mainly due to soft revenues as well as assets under management (AUM”). Also, long-term net outflows further added to the woes. However, lower expenses were the upside along with an increase in dividend, which will likely boost investors’ confidence in the stock.

On a GAAP basis, net income attributable to common shareholders came in at $161.0 million or 38 cents per share, down from $259.6 million or 60 cents per share in the year-ago quarter.

Details

GAAP operating revenues were $1.15 billion, down 11.1% year over year. Also, the figure came in below the Zacks Consensus Estimate of $1.19 billion.

Adjusted net revenue fell 10.8% year over year to $818.1 million. The decrease was largely due to a fall in all revenue components.

Adjusted operating expenses were down 5.9% year over year to $511.0 million. The decline was attributable to a fall in all expense components except a rise in property, office and technology costs.

Adjusted operating margin for the quarter was 37.5% compared with 40.8% in the year-ago quarter.

As of Mar 31, 2016, AUM decreased 3.4% year over year to $771.5 billion. Average AUM for the quarter totaled $747.5 billion, down 6% year over year. Moreover, long-term net outflows were $1.3 billion as against net inflows of $10.3 billion in the prior-year quarter.

As of Mar 31, 2016, cash and cash equivalents were $1,454.5 million compared with $1,851.4 million as of Dec 31, 2015. Total long-term debt amounted to $2,073.2 million as of Mar 31, 2016, compared with $2,072.8 million as of Dec 31, 2015.

Share Repurchases

In the reported quarter, Invesco repurchased shares worth $125.0 million at an average price of $28.73 per share.

Dividend Increase

Concurrently, Invesco declared a quarterly dividend of 28 cents per share, up 3.7% from the prior payout. The dividend will be paid on Jun 3 to shareholders of record at the close of business on May 13.

Our View

Invesco remains well positioned to benefit from improved global investment flows, supported by a diversified footprint and product offering. Also, the company’s steady capital deployment activities will continue to boost investors’ confidence in the stock.

However, high debt levels and incremental implementation costs expected from the business transformation program are anticipated to weigh on Invesco’s performance in the upcoming quarters. Though the company has undertaken cost-cutting measures, their impact is not expected to bear fruits any time soon as Invesco continues to invest in its franchise.

Currently, Invesco carries a Zacks Rank #3 (Hold).

Other Asset Managers

BlackRock, Inc. BLK reported first-quarter 2016 adjusted earnings of $4.25 per share, which lagged the Zacks Consensus Estimate of $4.29. Lower-than-expected quarterly results were due to a decrease in revenues triggered by market volatility. However, an almost stable expense line was a positive.

Janus Capital Group, Inc. JNS recorded a negative earnings surprise of 9.52% in first quarter 2016. Lower-than-expected results reflected the reduction in revenues and decrease in assets under management. However, the decline in operating expenses is a result of prudent expense management.

Legg Mason Inc. LM is scheduled to report results on Apr 29.

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