It has been about a month since the last earnings report for Eaton Vance (EV). Shares have lost about 24.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Eaton Vance 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 catalysts.
Eaton Vance Q1 Earnings Meet Estimates, Revenues Rise
Eaton Vance’s first-quarter fiscal 2020 (ended Jan 31) adjusted earnings of 86 cents per share were in line with the Zacks Consensus Estimate. The bottom line increased 17.8% year over year.
Results were driven by an improvement in AUM balance and rise in revenues. However, higher operating expenses acted as a headwind.
Net income attributable to shareholders (GAAP basis) was $104 million, up 19.8% from the year-ago quarter.
Revenues Improve, Expenses Rise
Total revenues were $452.6 million, up 11.4% year over year. Rise in management fees and service fees drove the increase. The top line surpassed the Zacks Consensus Estimate of $442.3 million.
Total expenses increased 11.4% from the prior-year quarter to $317.8 million due to a rise in all expense components.
Total operating income increased 11.2% year over year to $134.7 million.
Liquidity Position Strong, AUM Balance Improves
As of Jan 31, 2020, Eaton Vance had $544.1 million in cash and cash equivalents compared with $557.7 million as of Oct 31, 2019. The company had no borrowings outstanding against its $300-million credit facility.
Eaton Vance’s consolidated AUM grew 16.5% year over year to $518.2 billion as of Jan 31, 2020. Net inflows and market price appreciation drove the rise.
Share Repurchase Update
During the quarter, the company repurchased and retired 1.4 million shares of its Non-Voting Common Stock for $66.6 million under its existing repurchase authorization.
The company expects incremental $1-$1.5 million decrease in stock-based compensation in the second quarter of fiscal 2020.
Effective tax rate for fiscal 2020 is expected between 26.5% and 27%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
At this time, Eaton Vance has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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 indicates a downward shift. Notably, Eaton Vance has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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