We had issued an updated research report on Invesco Ltd. IVZ on Thursday, Dec 24, 2015. Based in Atlanta, GA, Invesco operates as an independent investment manager with approximately $791.1 billion in assets under management (“AUM”) as of Nov 30.
The company’s current AUM total represents a considerable improvement of 4.7% from $755.8 billion recorded as of Sep 30, 2015. Notably, continuous strengthening of the U.S. dollar and weakness in global equity markets disrupted the company’s AUM balance during the third quarter. Nonetheless, favorable market returns and foreign exchange, along with an increase in money market AUM and net long-term inflows, have been boosting the same in the fourth quarter.
We believe the company stays on track to achieve the organic growth rate of 3–5% for full-year 2015, along with an incremental margin target of 50–65%, given its robust institutional pipeline and a solid retail channel. Moreover, the company’s projected sales growth (F1/F0) of 1.3% as against nil growth for the industry ensures continuation of the upward trend in revenues.
On the flip side, however, an increase in AUM is projected to result in higher expenses. If fourth-quarter AUM stays stable sequentially, management expects compensation expenses within $340–$345 million; property, office & technology expense to increase to nearly $80–$83 million; general & administrative expenses to come within $77–$80 million; and marketing expenses in a range of $32–$35 million for the December-ending quarter.
Though Invesco’s earnings per share are projected to decline 1.4% year over year in 2015, it will still outperform the industry average growth of negative 2.7%. As such, we recommend investors interested in the investment management industry to hold this Zacks Rank #3 (Hold) stock. Moreover, the stock yields an annualized dividend of 3.3%, outpacing the industry average yield of 2.9%.
Nonetheless, analysts have been lowering their estimates for the stock, as reflected in the downward revision of the Zacks Consensus Estimate for 2015 and 2016. Over the last 30 days, the Zacks Consensus Estimate declined nearly 1% for 2015 to $2.47 per share; while for 2016, it fell 1.1% to $2.72 per share.
Better-ranked asset managers include Federated Investors, Inc. FII, Janus Capital Group, Inc. JNS and Woori Bank Co., Ltd. WF. All three stocks hold a Zacks Rank #2 (Buy).
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