Evercore’s Valuation Reflects Greater Revenue Cyclicality Than Peers

Evercore’s net revenue and earnings are experiencing steep declines compared with a strong 2021, but much of the company’s cyclicality is already incorporated in its stock price. The company reported net income to common shareholders of $82 million, or $2.03 per diluted share, on $577 million of net revenue. Year-to-date net revenue is 11% lower than the previous year, while net revenue in the quarter was 30% lower than a year ago. It can take several quarters from when a merger deal is announced to when it closes and when the company books the bulk of deal-related revenue, so this quarter’s 30% net revenue decline is more representative of the effect of the currently uncertain macroeconomic environment and lower appetite for mergers. We don’t anticipate making a material change to our $158 fair value estimate for narrow-moat-rated Evercore and assess shares are undervalued.