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Invesco Earnings: Positive Flows, Market Gains Lift AUM and Operating Results

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Invesco Ltd
(IVZ)

There was little in narrow-moat-rated Invesco’s IVZ first-quarter results that would alter our long-term view of the firm. We are leaving our $18 per share fair value estimate in place. We view the company’s shares as being only slightly undervalued right now.

Invesco reported solid first-quarter earnings per share of $0.38 on an adjusted basis, beating the FactSet consensus of $0.36 and our own estimate of $0.37. The majority of the outperformance was driven by higher management fees and better cost controls than we projected. The firm closed out the March quarter with $1.483 trillion in managed assets, up 5.2% sequentially but down 4.7% year over year.

Net long-term inflows of $2.9 billion during the first quarter broke a stream of negative flows that started in the second quarter of 2022 (with the quarterly run rate over the past two years being positive $10.1 billion). Annualized organic long-term assets under management growth of positive 0.8% during the March quarter was within our five-year forecast range calling for negative 1% to positive 4% average annual organic growth. While average long-term AUM was down 8.8% year over year, Invesco reported a 13.0% decline in first-quarter revenue when compared with the prior year’s period due primarily to a decline in its realization rate as well as lower levels of other revenue.

Invesco’s March-quarter adjusted operating margins (which excludes transaction, integration, restructuring, and other costs) of 30.4% were 910 basis points lower year over year but in line with our expectations. These results demonstrate the effects of negative operating leverage on the asset manager business model.

During the first quarter, Invesco also announced that president and CEO Marty Flanagan will be retiring at the end of June, having held the position since August 2005. Andrew Schlossberg, who currently heads up the Americas division at the firm, will succeed Flanagan as both president and CEO.

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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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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