Eaton Vance (EV) Down 24.5% Since Last Earnings Report: Can It Recover?

It has been about a month since Eaton Vance (EV) last reported earnings. Shares have lost about 24.5% in that time, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Eaton Vance waiting for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the company’s most recent earnings report in order to better understand the important catalysts.

Eaton Vance’s first-quarter earnings meet estimates, revenues grow

Eaton Vance’s first-quarter fiscal 2020 (ended January 31) adjusted earnings of 86 cents per share were in line with the Zacks Consensus Estimate. The financial result increased by 17.8% year on year.

The results were influenced by an improvement in the AUM balance and an increase in revenues. However, higher operating costs acted as a hindrance.

Net income attributable to shareholders (GAAP) was $104 million, an increase of 19.8% compared to the same quarter last year.

Revenues are growing, expenses are growing

Total revenue was $452.6 million, up 11.4% year-over-year. Increases in management fees and service fees contributed to the increase. The top line surpassed the Zacks Consensus Estimate of $442.3 million.

Total costs increased 11.4% from the prior-year quarter to $317.8 million due to increases in all cost components.

Total operating income increased 11.2% year-over-year to $134.7 million.

Liquidity position is strong, AUM balance is improving

As of January 31, 2020, Eaton Vance had $544.1 million in cash and cash equivalents compared to $557.7 million as of October 31, 2019. The Company had no outstanding borrowings under its $300 credit facility. million USD.

Eaton Vance’s consolidated net assets increased 16.5% year-over-year to $518.2 billion as of January 31, 2020. Net inflows and market price appreciation contributed to the increase.

Share an update on the buyback

During the quarter, the company repurchased and redeemed 1.4 million shares of non-voting common stock for $66.6 million under its existing repurchase authority.

Perspectives

The company expects stock-based compensation to gradually decline by $1 million to $1.5 million in the second quarter of fiscal 2020.

The effective tax rate for fiscal year 2020 is expected to be between 26.5% and 27%.

How have estimates changed since then?

Investors have witnessed an upward trend in estimate revisions over the last month.

VGM results

Right now, Eaton Vance has a Weak Growth Score of D, a rating with the same momentum score. Plotting a somewhat similar path, the stock received a grade of C on the value side, ranking in the middle 20% for this investment strategy.

Overall, the stock has a Total VGM Score of D. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on an upward trend, and the magnitude of these revisions indicates a downward shift. Notably, Eaton Vance carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Want the latest recommendations from Zacks Investment Research? Today you can download the top 7 stocks for the next 30 days. Click to get this free report

Eaton Vance Corporation (EV): Free Stock Analysis Report

To read this article on Zacks.com click here.