Invesco Maintained At Neutral - Analyst Blog
April 02 2013 - 12:51PM
Zacks
On Mar 28, 2013, we reaffirmed our Neutral recommendation on
Invesco Ltd. (IVZ) based on its modest earnings
performance, increasing asset inflows and sound capital deployment
actions. However, continuously rising expenses, volatile U.S.
dollar and higher level of debt are likely to mar the profitability
of this Zacks Rank #3 (Hold) stock.
Why the Neutral Stance?
Though Invesco’s fourth-quarter 2012 earnings fared better than the
prior quarter earnings, it had marginally missed the Zacks
Consensus Estimate. Lower-than-expected quarterly results came on
the back of an increase in operating costs, partly offset by higher
net revenue. Further, improved AUM and a stable balance sheet
position were the tailwinds.
In addition, in the past 60 days, there was a marginal downward
estimate revision for 2013. However, estimates for 2014 have
slightly improved over the same period.
Asset inflows at Invesco have witnessed increasing trends over the
past several quarters. With stabilizing equity markets, asset
inflows are anticipated to contribute significantly to earnings
growth. Also, Invesco is an asset for yield-seeking investors. In
Apr 2012, the company hiked its quarterly dividend by 41% over the
prior quarter to $0.1725 per share and maintained the same level
ever since. Moreover, in 2012, the company repurchased shares worth
$265.0 million and has nearly $467 million shares left to be
repurchased under its existing authorization.
Yet, elevated expenses remain a concern for Invesco. Though the
company has adopted a prudent approach to reduce its costs over the
last few years and intends to continue with its expense management
initiatives, the impact is not expected to be felt in the near
term. Further, the volatility in the financial markets is expected
to continue, in spite of signs of economic recovery, which in turn
could limit the upward potential of the company’s share price going
forward.
Further, Invesco’s high debt level might put the company in a
disadvantageous position if economic conditions worsen.
Other Stocks to Consider
Other stocks that are performing well and are worth considering in
the same sector include Apollo Global Management,
LLC (APO), Lazard Ltd. (LAZ) and
Affiliated Managers Group Inc. (AMG). Apollo and
Lazard hold a Zacks Rank #1 (Strong Buy) whereas Affiliated
Managers retains a Zacks Rank #2 (Buy).
AFFIL MANAGERS (AMG): Free Stock Analysis Report
APOLLO GLOBAL-A (APO): Free Stock Analysis Report
INVESCO LTD (IVZ): Free Stock Analysis Report
LAZARD LTD (LAZ): Free Stock Analysis Report
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