Evercore Earnings: Earnings Currently Weak but Should Have a Strong Recovery in Next 1 to 2 Years

As expected, Evercore had another relatively weak quarter, but we continue to believe that earnings will stage a strong recovery in the next 1 to 2 years. The company reported earnings to common shareholders of $52 million, or $1.30 per diluted share, on $570 million of net revenue. Net revenue was down 1% from the previous year, 14% higher from the previous quarter but about 20% lower than the trailing three-year average. Economic uncertainty and higher interest rates have weighed on revenue. While the management teams of investment banks seemed more optimistic the previous quarter before the “higher for longer” interest rate outlook emerged and the recent Israel-Hamas war, U.S. economic indicators are still fairly healthy, which should support a recovery in mergers and acquisitions advisory revenue in the next year or so. We don’t anticipate making a material change to our $171 fair value estimate for Evercore and assess shares are modestly undervalued.