Driven by strong top-line growth, Invesco Ltd. (IVZ) reported fourth-quarter 2014 adjusted earnings of 63 cents per share. It surpassed the Zacks Consensus Estimate by a penny, marking the sixth consecutive earnings beat. The bottom line also came in 8.6% above the prior-year quarter figure.
For 2014, adjusted earnings of $2.51 per share were in line with the Zacks Consensus Estimate. Further, this came in 17.8% above the prior-year figure.
Higher revenues and robust long-term net inflows were largely responsible for better-than-expected results. However, a rise in operating expenses slightly dampened the bottom-line growth. Notably, consistent growth in assets under management (“AUM”), along with steady capital deployment activities, continued to be the strong factor.
On a GAAP basis, net income attributable to common shareholders came in at $269.8 million or 62 cents per share, compared with $287.4 million or 64 cents in the year-ago quarter. For 2014, net income was $988.1 million or $2.27 per share, compared with $940.3 million or $2.10 in the prior year.
Performance in Detail
Adjusted net revenue climbed 5.7% year over year to $905.8 million. The rise was driven by an increase in all components of revenue, except service and distribution fees. However, the figure came below the Zacks Consensus Estimate of $1.3 billion.
Adjusted net revenue in 2014 rose 11% year over year to $3.6 billion. However, the figure was significantly below the Zacks Consensus Estimate of $5.2 billion.
Adjusted operating expenses increased 4.4% year over year to $532.7 million. The surge in expenses was resulted by a rise in all expense components.
Adjusted operating margin for the quarter stood at 41.2% versus 40.5% in the year-ago quarter.
As of Dec 31, 2014, AUM rose 1.8% year over year to $792.4 billion. Average AUM for the quarter totaled $789.8 billion, up 3.7% from the prior-year quarter. Moreover, long-term net inflows amounted to $2.5 billion compared with an inflow of $1.0 billion in the prior-year quarter.
As of Dec 31, 2014, cash and cash equivalents summed $1,514.2 million, compared with $1,331.2 million as of Dec 31, 2013. Total long-term debt stood at $1,589.3 million as of Dec 31, 2014, almost unchanged compared with the Dec 31, 2013 level.
Capital Deployment Activities
In the reported quarter, Invesco repurchased shares worth $50.0 million at an average price of $40.55 per share. Overall, year-to-date repurchases amount to $269.6 million representing 7.4 million shares.
Concurrent with the earnings release, Invesco announced a quarterly cash dividend of 25 cents per share. The dividend will be paid on Mar 6 to shareholders of record as on Feb 19, with an ex-dividend date of Feb 17.
Our View
Invesco remains well positioned to benefit from the improved global investment flows on the back of its diversified footprint and product offering. Further, the company’s enhanced capital deployment activities will continue to boost investors’ confidence in the stock.
Nevertheless, high debt levels and a constant rise in operating expenses are anticipated to adversely affect Invesco’s performance in the upcoming quarters. Though the company has initiated measures to curb costs, the impact is not expected to bear fruits any time soon as Invesco continues to invest in franchise.
Currently, Invesco carries a Zacks Rank #3 (Hold).
Performance of Other Asset Managers
Among other investment management firms, BlackRock, Inc. (BLK) reported fourth-quarter adjusted earnings of $4.82 per share, surpassing the Zacks Consensus Estimate of $4.68, on the back of robust inflows.
Janus Capital Group, Inc. (JNS) reported fourth-quarter earnings per share attributable to common shareholders of 24 cents, beating the Zacks Consensus Estimate by 4 cents. Results reflected top-line growth and increased AUM aided by net inflows.
T. Rowe Price Group, Inc.’s (TROW) fourth-quarter 2014 earnings of $1.18 per share beat the Zacks Consensus Estimate by 5 cents, driven by improved revenue growth.
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