Eaton Vance (EV) Q4 Earnings & Revenues Lag, Stock Down

Shares of Eaton Vance Corp. (NYSE:EV) fell nearly 2.3% following the release of its fourth-quarter and fiscal 2016 (ended Oct 31) results, before the market opened. Adjusted earnings of 57 cents per share for the reported quarter lagged the Zacks Consensus Estimate of 60 cents. However, earnings were 8% above the prior-year quarter.

For fiscal 2016, adjusted earnings of $2.13 per share missed the Zacks Consensus Estimate by a penny. Also, it was 7% below the prior-year figure.

Quarterly results were hurt by a rise in expenses, partially offset by higher revenues. However, growth in assets under management (AUM) and robust net inflows were impressive.

Net income attributable to shareholders in the reported quarter grew 5% year over year to $65.1 million. For fiscal 2016, it was $241.3 million, up 5% from fiscal 2015 level.

Revenues & Expenses Witness a Rise

Total revenue for the quarter amounted to $346.8 million, up 2% year over year. The rise was mainly driven by higher investment advisory and administrative fees. However, the figure lagged the Zacks Consensus Estimate of $351.2 million.

For fiscal 2016, total revenue fell 4% from the prior year to $1.34 billion. It also missed the Zacks Consensus Estimate of $1.35 billion.

Total expenses rose 2% year over year to $235.7 million in the reported quarter. The increase was largely due to higher compensation and related costs, and fund-related expenses.

Total operating income was relative stable, on a year-over-year basis, at $111.2 million.

Liquidity Position Weakens & AUM Improves

As of Oct 31, 2016, Eaton Vance had $424.2 million in cash and cash equivalents compared with $465.6 million as of Oct 31, 2015. Further, the company had no borrowings outstanding against its new $300-million credit facility.

Eaton Vance’s consolidated AUM grew 8% year over year to $336.4 billion, reflecting net inflows of $19.3 billion and market price appreciation of $5.8 billion.

Share Repurchase

During fiscal 2016, Eaton Vance repurchased nearly 7.3 million shares of its Non-Voting Common Stock for $253 million under its existing repurchase authorization.

Our Viewpoint

Rising demand for risk management and alternative investment solutions within the financial services industry will likely support Eaton Vance’s performance going forward. However, the company’s NextShares initiative continues to push costs up.

Eaton Vance currently holds a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Asset Managers

BlackRock, Inc. (NYSE:BLK) reported third-quarter 2016 adjusted earnings of $5.14 per share, which handily surpassed the Zacks Consensus Estimate of $5.05. Earnings were better than expected primarily due to a decline in total expenses. However, lower revenues acted as a headwind.

Waddell & Reed Financial Inc. (NYSE:WDR) reported third-quarter 2016 adjusted earnings of 64 cents per share, surpassing the Zacks Consensus Estimate of 51 cents. Better-than-expected results were mainly driven by lower expenses. A decline in revenues, elevated outflows and lower assets under management (AUM) were the other undermining factors.

Ameriprise Financial Inc.’s (NYSE:AMP) third-quarter 2016 operating earnings (excluding annual unlocking) per share of $2.29 missed the Zacks Consensus Estimate of $2.41. Results were lower than expected primarily due to escalated operating expenses. However, a rise in revenues and the increase in assets under management (“AUM”) and assets under administration (“AUA”) were on the positive side.

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