Evercore (EVR) Stock Gains 10% As Q4 Earnings Beat Estimates

Shares of Evercore (NYSE:EVR) gained 10% in response to fourth-quarter 2019 results. Its adjusted earnings per share of $2.72 surpassed the Zacks Consensus Estimate of $2.14. However, the bottom line declined 31% from the prior-year quarter.

The quarterly results reflected lower expenses and rise in assets under management (AUM) balance. In addition, liquidity position was consistently strong. However, decline in net revenues was a major drag. Also, performance of the Investment Banking segment failed to impress.

Including certain non-recurring items, on a GAAP basis, net income available to common shareholders was $105.2 million or $2.48 per share down from $163.3 million or $3.67 per share in the year-ago quarter.

In 2019, adjusted earnings of $7.70 per share declined 15% from the prior year. However, it outpaced the consensus estimate of $7.54. After adjustments, net income came at 297.4 million or $6.89 per share compared with $377.2 million or $8.33 in 2018.

Revenues Decline, Expenses Down

Net revenues (adjusted) decreased 14% year over year to $668.5 million in the reported quarter. This downside resulted from fall in advisory fees (down 19%). On a GAAP basis, net revenues were $660.1 million, down 14%.

Adjusted net revenues in 2019 were $2 billion, down 2%. Yet, the top line surpassed the Zacks Consensus Estimate of $1.9 billion. On a GAAP basis, net revenues of $2 billion decreased 3% from the prior year.

Total expenses declined 3% to $503.4 million from the prior-year quarter. This downside stemmed from fall in employee compensation and benefits expenses, professional fees and execution, clearing and custody fees.

Adjusted compensation ratio was 58.6%, up from the year-earlier quarter’s 55%.

Adjusted operating margin came in at 26.9% compared with the prior-year quarter’s 34%.

Quarterly Segment Performance (Adjusted)

Investment Banking: Net revenues declined 15% year over year to $650.9 million. Also, operating income moved down 33% to $174.4 million. Advisory client transactions were 281,000, down 9%.

Investment Management: Net revenues were $17.5 million, up 22% year over year. Operating income was $5.1 million up 52%. Additionally, AUM balance of $10.7 million was reported in the fourth quarter, up 17%.

Balance Sheet Position

As of Dec 31, 2019, cash, cash equivalents, marketable securities and certificates of deposit totaled $1.3 billion. Moreover, current assets exceeded current liabilities by $1 billion as of the same date.

Repurchase Update

During the December-ended quarter, the company repurchased nearly 0.4 million shares at an average cost of $75.89 per share.

Our Viewpoint

Evercore’s strategic initiatives to bolster its investment banking segment are likely to support top-line growth. Also, it remains well poised to undertake any opportunistic expansion given its sound liquidity position. While expenses dropped this quarter, the company’s recruitment spree is likely to lead to higher costs, going forward.

Zacks Rank

Currently, Evercore carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance & Earning Release Dates of Other Banks

Better-than-expected capital markets performance drove Morgan Stanley’s (NYSE:MS) fourth-quarter 2019 adjusted earnings of $1.20 per share, which outpaced the Zacks Consensus Estimate of 98 cents. Also, the figure jumped 64% from the year-ago quarter. Results for the reported quarter include severance costs of $172 million and exclude net discrete tax benefit.

Riding on an impressive DARTs’ performance, E*TRADE Financial (NASDAQ:ETFC) came up with a positive earnings surprise of 1.2% in fourth-quarter 2019. Adjusted earnings of 84 cents per share comfortably surpassed the Zacks Consensus Estimate by a penny. However, the reported figure compares unfavorably with the prior-year quarter’s $1.06.

Greenhill & Co., Inc. (NYSE:GHL) will report quarterly numbers on Feb 4.

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