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Category: Stock Market and Eaton Vance
Date: 29 August 2019 Stock Price: $41.46 We take a look at the 3rd quarter earnings report for their 2019 fiscal year of investment and wealth management firm Eaton Vance.
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About Eaton Vance
Eaton Vance and its affiliates offer individuals and institutions a broad array of investment strategies and wealth management solutions. The company’s long record of exemplary service, timely innovation and attractive returns through a variety of market conditions has made Eaton Vance the investment manager of choice for many of today’s most discerning investors.
The image below shows the assets under management as at end July 2019 per investment mandate as well as the revenue earned for the three months by investment mandate. The group had a total of $482.8 billion under management as at the end July 2019
The image below shows the assets under management as at end July 2019 per investment mandate as well as the revenue earned for the three months by investment mandate. The group had a total of $482.8 billion under management as at the end July 2019
The bulk of the group's management fee revenue is earned from equity (with it bringing in 48% of management fee revenue for the quarter ended July 2019). The second biggest fee revenue contributor is Fixed income with it contributing 20% for the quarter ended July 2019. The summary below shows the management fee revenue earned for the quarter ended July 2019:
- Equity: 48%
- Fixed income: 20%
- Floating-rate income: 13%
- Portfolio implementation: 12%
- Alternative: 4%
- Exposure management: 3%
Financial overview of Eaton Vance's latest earnings report
Numbers we are interested in: (for the quarter):
- Total revenue: $431.235 million (up 1% from $428.691 million for the same quarter of the previous year)
- Total expenses: $294.100 (up 3% 286,427 million for the same quarter of the previous year)
- Net income: $ 102.221 million (up slightly from $101.794 million for the same quarter of the previous year)
- Diluted earnings per share: $ 0.90 (up 8% from $ 0.83 for the same quarter of the previous year)
- Diluted number of shares outstanding: 113.464 million (down 8% from 122.741 million for the same quarter of the previous year)
- Dividends declared per share: $ 0.35 (up 13% from $ 0.31 for the same quarter of the previous year)
- Dividend yield: 4.1% assuming the same dividend is paid for all the other quarters of the fiscal year)
- Cash and cash equivalents: $ 527.708 million
- Cash and cash equivalents per share: $4.65
- Cash and cash equivalents makes up 11% of the group's market capital
- Total permanent equity: $1.129 billion
- Total permanent equity per share: $9.95
Eaton Vance management commentary on the results and earnings guidance
Boston, MA, August 27, 2019 – Eaton Vance Corp. (NYSE: EV) today reported earnings per diluted share of $0.90 for the third quarter of fiscal 2019, an increase of 8 percent from $0.83 of earnings per diluted share in the third quarter of fiscal 2018 and an increase of 1 percent from $0.89 of earnings per diluted share in the second quarter of fiscal 2019. The Company reported adjusted earnings per diluted share(1) of $0.90 for the third quarter of fiscal 2019, an increase of 10 percent from $0.82 of adjusted earnings per diluted share in the third quarter of fiscal 2018 and an increase of 1 percent from $0.89 of adjusted earnings per diluted share in the second quarter of fiscal 2019. Earnings under U.S. generally accepted accounting principles (U.S. GAAP) matched adjusted earnings in both the third and second quarters of fiscal 2019 and exceeded adjusted earnings by $0.01 per diluted share in the third quarter of fiscal 2018, reflecting the reversal of net excess tax benefits related to stock‐ based awards of $1.3 million.
Net gains and other investment income related to seed capital investments contributed $0.06 to earnings per diluted share in the third quarter of fiscal 2019, $0.01 in the third quarter of fiscal 2018 and $0.03 in the second quarter of fiscal 2019. Other income and expense amounts related to consolidated collateralized loan obligation (CLO) entities reduced earnings by $0.02 and $0.01 per diluted share in the third quarter of fiscal 2019 and fiscal 2018, respectively, and contributed $0.07 to earnings per diluted share in the second quarter of fiscal 2019. Consolidated net inflows of $8.0 billion in the third quarter of fiscal 2019 represent a 7 percent annualized internal growth rate in managed assets (consolidated net inflows divided by beginning of period consolidated assets under management).
This compares to net inflows of $3.7 billion and 3 percent annualized internal growth in managed assets in the third quarter of fiscal 2018 and net inflows of $4.6 billion and annualized internal growth in managed assets of 4 percent in the second quarter of fiscal 2019. Excluding exposure management mandates, the Company’s annualized internal growth rate in managed assets was 5 percent in the third quarter of fiscal 2019, 8 percent in the third quarter of fiscal 2018 and 3 percent in the second quarter of fiscal 2019
The Company’s annualized internal management fee revenue growth rate (management fees attributable to consolidated inflows less management fees attributable to consolidated outflows divided by beginning of period consolidated management fee revenue) was 2 percent in the third quarter of fiscal 2019, 5 percent in the third quarter of fiscal 2018 and 1 percent in the second quarter of fiscal 2019. These growth rates reflect the Company’s retrospective adoption of Accounting Standard Update (ASU) 2014-09, Revenue from Contracts with Customers, on November 1, 2018, which provides for management fee revenue to be recorded net of associated subsidy expenses. Consolidated assets under management were $482.8 billion on July 31, 2019, up 7 percent from $453.2 billion of consolidated managed assets on July 31, 2018 and up 3 percent from $469.9 billion of consolidated managed assets on April 30, 2019. The year-over-year increase in consolidated assets under management reflects net inflows of $16.2 billion and market price appreciation of $13.4 billion. The sequential quarterly increase in consolidated assets under management reflects net inflows of $8.0 billion and market price appreciation of $4.8 billion in the third quarter of fiscal 2019.
“Eaton Vance’s distinctive array of investment strategies and services continued to attract strong investor interest in the third quarter of our fiscal 2019, propelling consolidated assets under management to a new record high,” said Thomas E. Faust Jr., Chairman and Chief Executive Officer. “Innovation, investment management excellence and outstanding distribution and service remains our formula for success in a changing asset management industry.” Average consolidated assets under management were $471.0 billion in the third quarter of fiscal 2019, up 6 percent from $446.0 billion in the third quarter of fiscal 2018 and up 3 percent from $456.2 billion in the second quarter of fiscal 2019
The Company’s weighted average basic shares outstanding were 109.1 million in the third quarter of fiscal 2019 and 110.4 million in the second quarter of fiscal 2019, a decrease of 1 percent. The sequential reduction reflects share repurchases in excess of new shares issued upon the vesting of restricted stock awards and the exercise of employee stock options. On a diluted basis, the Company’s weighted average shares outstanding were 113.5 million in the third quarter of fiscal 2019 and 114.2 million in the second quarter of fiscal 2019, a decrease of 1 percent. The change in weighted average diluted shares outstanding in the third quarter of fiscal 2019 also reflects an increase in the dilutive effect of in-the-money options and unvested restricted stock awards due to higher market prices of the Company’s shares.
Net gains and other investment income related to seed capital investments contributed $0.06 to earnings per diluted share in the third quarter of fiscal 2019, $0.01 in the third quarter of fiscal 2018 and $0.03 in the second quarter of fiscal 2019. Other income and expense amounts related to consolidated collateralized loan obligation (CLO) entities reduced earnings by $0.02 and $0.01 per diluted share in the third quarter of fiscal 2019 and fiscal 2018, respectively, and contributed $0.07 to earnings per diluted share in the second quarter of fiscal 2019. Consolidated net inflows of $8.0 billion in the third quarter of fiscal 2019 represent a 7 percent annualized internal growth rate in managed assets (consolidated net inflows divided by beginning of period consolidated assets under management).
This compares to net inflows of $3.7 billion and 3 percent annualized internal growth in managed assets in the third quarter of fiscal 2018 and net inflows of $4.6 billion and annualized internal growth in managed assets of 4 percent in the second quarter of fiscal 2019. Excluding exposure management mandates, the Company’s annualized internal growth rate in managed assets was 5 percent in the third quarter of fiscal 2019, 8 percent in the third quarter of fiscal 2018 and 3 percent in the second quarter of fiscal 2019
The Company’s annualized internal management fee revenue growth rate (management fees attributable to consolidated inflows less management fees attributable to consolidated outflows divided by beginning of period consolidated management fee revenue) was 2 percent in the third quarter of fiscal 2019, 5 percent in the third quarter of fiscal 2018 and 1 percent in the second quarter of fiscal 2019. These growth rates reflect the Company’s retrospective adoption of Accounting Standard Update (ASU) 2014-09, Revenue from Contracts with Customers, on November 1, 2018, which provides for management fee revenue to be recorded net of associated subsidy expenses. Consolidated assets under management were $482.8 billion on July 31, 2019, up 7 percent from $453.2 billion of consolidated managed assets on July 31, 2018 and up 3 percent from $469.9 billion of consolidated managed assets on April 30, 2019. The year-over-year increase in consolidated assets under management reflects net inflows of $16.2 billion and market price appreciation of $13.4 billion. The sequential quarterly increase in consolidated assets under management reflects net inflows of $8.0 billion and market price appreciation of $4.8 billion in the third quarter of fiscal 2019.
“Eaton Vance’s distinctive array of investment strategies and services continued to attract strong investor interest in the third quarter of our fiscal 2019, propelling consolidated assets under management to a new record high,” said Thomas E. Faust Jr., Chairman and Chief Executive Officer. “Innovation, investment management excellence and outstanding distribution and service remains our formula for success in a changing asset management industry.” Average consolidated assets under management were $471.0 billion in the third quarter of fiscal 2019, up 6 percent from $446.0 billion in the third quarter of fiscal 2018 and up 3 percent from $456.2 billion in the second quarter of fiscal 2019
The Company’s weighted average basic shares outstanding were 109.1 million in the third quarter of fiscal 2019 and 110.4 million in the second quarter of fiscal 2019, a decrease of 1 percent. The sequential reduction reflects share repurchases in excess of new shares issued upon the vesting of restricted stock awards and the exercise of employee stock options. On a diluted basis, the Company’s weighted average shares outstanding were 113.5 million in the third quarter of fiscal 2019 and 114.2 million in the second quarter of fiscal 2019, a decrease of 1 percent. The change in weighted average diluted shares outstanding in the third quarter of fiscal 2019 also reflects an increase in the dilutive effect of in-the-money options and unvested restricted stock awards due to higher market prices of the Company’s shares.
Eaton Vance (NYSE: EV) stock price history
The image below, obtained from Google, shows Eaton Vance's stock price history over the last 5 years. And while there were significant stock price movements to the up and down side over the last 5 years the price it is trading at now is very similar to the $40 odd it was trading at 5 years ago. Basically when looking at the returns over the last 5 years, it looks like the stock just moved sideways
Eaton Vance (NYSE: EV) latest stock valuation
Based on the group's latest results, their strong cash position and the solid dividend they are paying we have a target price (full value price) fro Eaton Vance of $61.20 a share. Even at this valuation the group will trade at a dividend yield of 2.3% and PE ratio of 16.9 which is not the most expensive valuation on the New York Stock Exchange by any stretch of the imagination. We therefore believe the current price offers long term fundamental investors a great entry point into a solid company with a long history and track record.