There was little in narrow-moat Invesco’s (IVZ) fourth-quarter results that would alter our long-term view of the company, and we are leaving our $42 fair value estimate in place. Invesco closed the December quarter with $937.6 billion in total assets under management, up 2.2% sequentially and 15.3% year over year. Excluding the impact of the Source acquisition, which added $26 billion to AUM in the third quarter, managed assets were up 12.1% year over year. Organic growth remained positive in the fourth quarter, with Invesco reporting $4.4 billion in long-term net inflows (which excludes money market flows), derived from its active ($3.6 billion) and passive ($800 million) offerings.
With average long-term AUM up 9.6% year over year and the company’s realization rate increasing to 0.472% from 0.468% in the prior-year period due to a mix shift into higher-fee-generating assets, the company reported a 16.0% increase in fourth-quarter management fee revenue and a 15.1% jump in total revenue, aided largely by an uptick in performance fees. Full-year top-line growth of 9.0% was right in line with our forecast for high-single- to double-digit revenue growth during 2017. The adjusted full-year operating margin of 25.8% was 55 basis points higher than the year-ago level and in line with our expected range of 25%-27% for 2017.
Greggory Warren, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.