Evercore (EVR) Q3 Earnings Impressive, Stock Declines 7.1%

Evercore EVR reported third-quarter 2019 adjusted earnings per share of $1.26, higher than the prior-year quarter’s $1.23 per share.

The quarterly results reflected higher revenues and rise in assets under management (AUM). In addition, liquidity position was consistently strong. However, escalating expenses were a major drag, increasing investors’ concerns. Hence, following the results, shares of the company declined around 7.1%.

Including certain one-time items, on a GAAP basis, net income available to common shareholders was $43.3 million or $1.01 per share compared with $49.5 million or $1.08 per share in the year-ago quarter.

Revenues Increase, Expenses Rise

Net revenues increased 6% year over year to $408.5 million in the reported quarter. This upside resulted from hike in advisory fees (up 5%). On a GAAP basis, net revenues were $402.2 million, up 5%.

Total expenses flared up 8.3% to $323.7 million from the prior-year quarter. This upswing stemmed from rise in employee compensation and benefits expenses, along with elevated non-compensation costs.

Adjusted compensation ratio was 58%, up from the year-earlier quarter’s 57.5%.

Adjusted operating margin came in at 20.8% compared with the prior-year quarter’s 22.6%.

Quarterly Segment Performance (Adjusted)

Investment Banking: Net revenues jumped 6% year over year to $392.1 million. Yet, operating income edged down 1% to $80.4 million. Advisory client transactions were 213,000, up 9% year over year.

Investment Management: Net revenues were $16.5 million, down 2% from the last year’s comparable quarter. Operating income was $4.4 million compared with the $5.7 million recorded a year ago. Additionally, AUM of $10.3 million was reported in the third quarter, up 4%.  

Balance Sheet Position

As of Sep 30, 2019, cash, cash equivalents, marketable securities and certificates of deposit totaled $620.1 million. Moreover, current assets exceeded current liabilities by $894.4 million as of the same date.

Capital Deployment

During the September-end quarter, the company repurchased 0.5 million shares at an average cost of $78.87 per share.

Our Viewpoint

Evercore displayed an impressive performance during the July-September quarter. Its top-line strength displays earnings stability. This apart, the company’s strategic initiatives to bolster its investment banking segment bode well. Also, it remains well poised to undertake any opportunistic expansion given its sound liquidity position. Nevertheless, escalating expenses are a concern.

Evercore Inc Price, Consensus and EPS Surprise

Evercore Inc Price, Consensus and EPS Surprise

Evercore Inc price-consensus-eps-surprise-chart | Evercore Inc Quote

Currently, Evercore carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Banks

Better-than-expected capital markets performance drove Morgan Stanley’s MS third-quarter 2019 adjusted earnings of $1.21 per share, which outpaced the Zacks Consensus Estimate of $1.10. Also, the figure increased 3% from the year-ago quarter. Results in the reported quarter excluded net discrete tax benefit.

Riding on top-line strength, E*TRADE Financial ETFC delivered a positive earnings surprise of 8% in third-quarter 2019. Earnings of $1.08 per share comfortably surpassed the Zacks Consensus Estimate of $1.00. Moreover, the earnings figure compared favorably with the prior-year quarter’s $1.00.

Among others, Greenhill & Co., Inc. GHL will report quarterly numbers on Nov 5.

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