Morningstar | Some Signs of a Slowdown in Evercore's 3Q Numbers
While narrow-moat-rated Evercore's third-quarter results--including $381 million of net revenue and $49 million of net earnings (or $1.08 per diluted share)--were healthy, there were signs of a slowdown. The company's third-quarter revenue was 6% lower year over year, and 16% lower than the quarterly average during the first half of 2018. Third-quarter revenue also included $50.8 million of revenue that would have otherwise been reported in the fourth quarter if not for an accounting change, inferring that the decline in the company's top line was actually worse than reported. It also means that fourth-quarter revenue won't exhibit as much positive seasonality as we've seen in previous years. We don't anticipate making a material change to our $92 per share fair value estimate and believe that Evercore's shares are fairly valued right now.While it's true that the company had fewer acquisition deals close during the third quarter, and deal closings can be quite lumpy, other revenue lines were also showing a little pressure and the outlook for acquisition activity has become more suspect. Underwriting revenue in the third quarter was 54% lower than the first-half quarterly average, and trading commissions were 4% lower, but these two lines comprised only 15% of net revenue during the third quarter. Shaky equity markets often dampen equity underwriting activity, and commissions across the sector were also under pressure from MiFID II regulation in Europe, which is causing asset managers to reassess what they pay for trading and investment research. Although acquisition activity and financial advisory remain the main drivers of Evercore's revenue, at around 80% of the total, there is increasing fear of trade restrictions reducing cross-border acquisition activity, with rising interest rates and declining equity markets could impact financing costs. And while the economy seems relatively healthy, cracks are appearing.
Evercore is a holding company. Through its subsidiaries, the company is an investment banking advisory firm. The company's segments include: Investment Banking, which includes the advisory business through which it provides advice to clients on mergers, acquisitions, divestitures, shareholder activism and other corporate transactions, and the Evercore International Strategy and Investment business through which it provides macroeconomic, policy and fundamental equity research and agency-based equity securities trading for institutional investors; and Investment Management, which includes the wealth management business through which it provides investment advisory, wealth management and fiduciary services.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.