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Invesco (IVZ) Down 1.5% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Invesco (IVZ). Shares have lost about 1.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Invesco due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Invesco's Q4 Earnings Beat Estimates, AUM Up

Invesco’s fourth-quarter 2023 adjusted earnings of 47 cents per share handily surpassed the Zacks Consensus Estimate of 38 cents. The bottom line grew 20.5% from the prior-year quarter.

Results benefited from an increase in AUM balance on decent inflows. However, a rise in operating expenses and lower revenues were the undermining factors.

On a GAAP basis, net loss attributable to common shareholders was $742.3 million or $1.64 per share, against net income of $187.8 million or 41 cents per share a year ago. Our estimate for the metric was $119 million and did not include non-cash intangible asset impairment charge of $1.2 billion.

For 2023, adjusted earnings per share of $1.51 beat the consensus estimate of $1.43 but declined 10.1% year over year. Net loss attributable to common shareholders (GAAP) was $333.7 million or 73 cents per share against net income of $683.9 million or $1.49 per share a year ago.

Revenues Decline, Expenses Rise

Adjusted quarterly net revenues were $1.05 billion, falling 5.6% year over year. The top line lagged the Zacks Consensus Estimate of $1.11 billion.

For 2023, net revenues were $4.31 billion, falling 7.2% year over year. The top line missed the Zacks Consensus Estimate of $4.37 billion.

Adjusted operating expenses were $770.5 million, up marginally on a year-over-year basis. We expected the metric to be $749.9 million.

During the reported quarter, the company incurred $22 million in organizational change expenses. These efforts are expected to generate $50 million in total cost savings in 2024. The company has already realized $44 million in annualized net savings till 2023-end, and the remaining $6 million in annualized net savings is projected to be achieved in the first quarter of 2024.

The adjusted operating margin was 26.3%, down from 30.6% a year ago.

AUM Balance Increases

As of Dec 31, 2023, AUM was $1.59 trillion, which increased 12.5% year over year. Average AUM at the fourth-quarter end totaled $1.52 trillion, up 8.9%.

The company witnessed long-term net inflows of $6.7 billion in the reported quarter.

Balance Sheet Strong

As of Dec 31, 2023, cash and cash equivalents were $1.47 billion compared with $1.24 billion as of Sep 30, 2023.

Long-term debt was $1.49 billion. The credit facility balance was nil as of Dec 31, 2023.

Outlook

Management expects compensation expenses to be $25 million higher on a sequential basis in the first quarter of 2024 because of seasonality.

In 2024, G&A expenses will include roughly $10 million of Alpha platform implementation expenses every quarter. In the first quarter of 2024, the metric is anticipated to be slightly down sequentially. Overall expense base is likely to be relatively stable to moderately rising in 2024.

Non-GAAP effective tax rate to be 23-25% in the first quarter of 2024.

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How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Invesco has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. It comes with little surprise Invesco has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Invesco belongs to the Zacks Financial - Investment Management industry. Another stock from the same industry, BlackRock (BLK), has gained 2.5% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.

BlackRock reported revenues of $4.63 billion in the last reported quarter, representing a year-over-year change of +6.8%. EPS of $9.66 for the same period compares with $8.93 a year ago.

BlackRock is expected to post earnings of $9.22 per share for the current quarter, representing a year-over-year change of +16.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.5%.

BlackRock has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.

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