Invesco Surpasses by a Cent – Analyst Blog

Invesco Limited’s (IVZ) first-quarter earnings came in at 27 cents per share, only a penny ahead of the Zacks Consensus Estimate of 26 cents. This also compares favorably with earnings of 11 cents in the prior-year quarter.

 

On a GAAP basis, earnings came in at 21 cents per share, compared with 8 cents in the year-ago quarter. GAAP results for the reported quarter included $17.2 million of transaction and integration charges related to the pending acquisition of the retail asset management business of Morgan Stanley (MS).

 

The year-over-year increase in Invesco’s earnings was due primarily to a 32.3% increase in net revenues, partially offset by a 6.7% increase in operating expenses. Increased market values as a result of the gradual recovery of the global equity markets helped improve assets under management (AUM) 20.5% year-over-year to $419.6 billion as on March 31, 2010.

 

However, AUM has declined from $423.1 billion as on December 31, 2009 due to the impact of less favorable foreign exchange rates and net outflows in institutional money market funds.

 

Invesco’s adjusted net revenues for the reported quarter decreased 3.8% sequentially but increased 32.3% year over year to $544.4 million. The year-over-year increase in revenues was due primarily to the overall increase in average AUM and a favorable change in the mix of asset classes. On a sequential basis, revenues were impacted by exchange rate changes.

 

Adjusted investment management fees decreased 1.7% sequentially but increased 36.9% year over year to $617.6 million. Service and distribution fees increased 1.0% sequentially and 26.4% year over year to $112.5 million.

 

Adjusted operating expenses decreased 4.4% sequentially but increased 8.7% year over year to $361.4 million. The sequential increase in operating expenses was due primarily to the impact of changes in foreign exchange rates.

 

On a sequential basis, employee compensation expenses decreased 4.3% and marketing expenses decreased 8.1%. Adjusted operating margin for the reported quarter was 33.6%, compared with 33.2% in the prior quarter and 19.2% in the prior-year quarter.

 

Average AUM for the reported quarter was $417.6 billion, compared with $420.3 billion in the prior quarter and $351.0 billion in the prior-year quarter.

 

Long-term net inflow was $3.7 billion, compared with $2.6 billion in the prior quarter and $0.7 billion in the prior-year quarter. Money market net outflow was $10.6 billion, compared with net outflow of $7.7 billion in the prior quarter and net inflow of $8.6 billion in the prior-year quarter.

 

Headquartered in Atlanta, Georgia, Invesco operates as an independent investment manager and offers a broad range of investment products and services. We expect significant improvement in operating leverage from Invesco’s expense reduction initiatives. Furthermore, due to its broad diversification, the company should benefit from the improvement in global investment flows.

 

Invesco was selected by the U.S. Treasury as a pre-qualified fund manager to participate in the Treasury’s Public-Private Investment Program (PPIP). Yesterday, Invesco announced the closure of its Mortgage Recovery Fund offering with total commitment of more than $1.46 billion, principally from institutional clients. This offering provides Invesco exposure to mortgage loans and securities.