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Invesco Earnings: Continued Positive Flows Marred by Lower Adjusted Operating Margins

We expect to raise our fair value estimate of Invesco’s stock.

A logo sign outside of the headquarters of Invesco Ltd., in Atlanta, Georgia.

Key Morningstar Metrics for Invesco

What We Thought of Invesco’s Earnings

While there was little in Invesco’s IVZ fourth-quarter results that would alter our long-term view of the firm, we expect to slightly increase our fair value estimate of $15 per share once we’ve incorporated the results. The firm reported earnings per share of $0.47 on an adjusted basis, above the FactSet consensus (and our own) estimate of $0.40. Most of the difference came in below the line, as adjusted revenue and operating income for the quarter fell just below our expectations, with the company benefiting from higher interest and dividend income and other gains than we were forecasting.

Invesco closed out the quarter with $1.585 trillion in assets under management, up 6.6% sequentially and 12.5% year over year. Net long-term inflows of $6.7 billion during the period were much better than the $1.9 billion quarterly run rate for flows in the past eight calendar quarters. Although this represented an annualized organic AUM growth rate of 1.8%, full-year growth of 0.7% was at the lower end of our five-year forecast range of 0%-3% annually.

While average long-term AUM was up 4.2% year over year, Invesco posted a 5.6% decline in adjusted fourth-quarter revenue when compared with the prior-year period due to a decline in its realization rate, as well as lower performance fees year over year. This left the company’s full-year revenue decline at 7.2%, which was outside of our forecast range between -5% and -7%.

Invesco’s full-year adjusted operating margin of 28.2% was 660 basis points lower year over year, and at the lower end of our expectations for a margin of 28%-29% during 2023. These results demonstrate the effects of negative operating leverage on the traditional asset manager model during adverse market conditions, especially when realization rates are pressured.

Invesco Stock Price

Data as of Source: Morningstar Direct.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Greggory Warren

Strategist
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Greggory Warren, CFA, is a strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers the traditional U.S.-and Canadian-based asset managers, as well as Berkshire Hathaway.

Before assuming his current role in 2017, Warren covered the financial-services sector as a senior analyst since late 2008. Prior to that time, he covered non-alcoholic beverage manufacturers and distributors, packaged food firms, food service distributors, and tobacco companies. Before joining Morningstar in 2005, Warren worked as a buy-side equity analyst for more than seven years, covering consumer staples and consumer cyclicals.

Warren holds a bachelor's degree in accounting and English from Augustana College. He also holds the Chartered Financial Analyst® designation and is a member of the CFA Society of Chicago. During 2014-19, Warren was selected to participate on the analyst panel at Berkshire Hathaway’s annual meeting, asking questions directly of Warren Buffett and Charlie Munger. The analyst panel was disbanded ahead of Berkshire’s 2020 annual meeting. Warren also ranked second in the investment services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

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