Invesco Limited’s (IVZ) third quarter earnings came in at 24 cents per share, a penny ahead of the Zacks Consensus Estimate. However, this compares unfavorably with 33 cents in the prior-year quarter.
The year-over-year decrease in earnings was due primarily to a 14.7% decline in revenue, partially offset by a 12.3% decline in operating expenses. However, increased market values as a result of the gradual recovery of the global equity markets and the impact of slightly more favorable foreign exchange rates helped improve assets under management 7.3% sequentially and 1.8% year-over-year.
Operating revenues increased 12.9% sequentially but decreased 14.7% year-over-year to $705.8 million. Operating revenue for the quarter included performance fees of $4.3 million, compared to $18.1 million in the prior-year quarter. Net revenue for the quarter increased 13.8% sequentially but decreased 13.5% year-over-year to $534.8 million.
Operating expenses increased 7.7% sequentially but decreased 12.3% year-over-year to $554.2 million. Net operating margin for the quarter was 29.9%, compared to 25.1% in the prior quarter and 32.7% in the prior-year quarter.
Net income attributable to common shareholders came in at $105.2 million, compared to $131.8 million for the same period in 2008. Net income increased 39.0% sequentially but decreased 20.2% on a year-over-year basis.
Assets under management at Sep 30, 2009, were $416.9 billion, compared to $388.7 billion at the end of the prior quarter and $409.6 billion at the end of the prior-year quarter. During the third quarter, average assets under management were $406.9 billion, compared to $376.5 billion in the prior quarter and $448.3 billion in the prior-year quarter.
Long-term net inflows were $2.6 billion, compared to net inflows of $3.0 billion in the prior quarter and net outflows of $3.0 billion in the prior-year quarter. Money market net outflows were $2.6 billion, compared to net inflows of $1.7 billion in the prior quarter and net outflows of $8.1 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. On Oct 19, 2009, the company said that it will acquire Morgan Stanley’s (MS) retail asset management business, including Van Kampen Investments. The deal will boost Invesco’s assets under management by $119 billion.
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. As such, we maintain our Neutral recommendation on Invesco.
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