Eaton Vance - Growth & Income

Zacks Investment Research
Posted: Nov 29, 2012 12:00 AM
Eaton Vance Corp. (EV) hit its 52-week high on November 23 in the wake of its strong fiscal fourth quarter report. Moreover, this Zacks #2 Rank (Buy) investment manager pays a regular quarterly dividend with a yield of 2.5%. This yield, along with a year-to-date return of 35.6% and an expected long-term earnings growth rate of 12.4%, suggest that EV could be a solid pick for investors seeking both growth and income.

Impressive Fourth Quarter Earnings

On November 20, Eaton Vance Corp. reported adjusted earnings per share of 53 cents for its fiscal fourth quarter, topping the Zacks Consensus Estimate by 10.4% and the year-ago earnings by 12.8%. The improvement was primarily due to the revenue growth, partially offset by elevated total expenses.

For fiscal year 2012, adjusted earnings per share came in at $1.89, sliding 5.5% year over year.

Total revenue for the quarter climbed 4.0% year over year to $309.9 million, driven mainly by elevated investment advisory and administrative fees. However, the company's total expenses increased 6.0% to $203.5 million, primarily due to higher compensation and related costs.

As of October 31, 2012, Eaton Vance Corp.’s assets under management stood at $199.5 billion, up 6.0% year over year. The company recorded net inflows of $2.2 billion in long-term funds and separate accounts, compared with net outflows of $2.7 billion in the prior-year quarter.

Earnings Estimates Moving Higher

The Zacks Consensus Estimate for the fiscal year ending October 2013 is $2.11 per share, which is up nearly 4% in the past 30 days as 8 of 11 estimates were revised higher. Just the past 7 days have seen 4 upward revisions and an improvement of 2.4%. This outlook implies year-over-year growth of 11.7%.

Meanwhile, the Zacks Consensus Estimate for the fiscal year ending October 2014 is $2.33 per share, or more than 10% better than the previous year. This outlook has gained about 1.3% in 30 days.

Dividend Payment

Eaton Vance Corp. is one of the few banks that continued paying dividends throughout the financial crisis. The company raised its dividend by 5.3% in October 2012, marking its 32nd straight fiscal year with an enhanced dividend.

Currently, the company pays a quarterly dividend of 20 cents per share, affirming an annual yield of 2.5%.

Valuation Looks Reasonable

Shares of Eaton Vance Corp. currently trade at 15.0x 12-month forward earnings, a 4.0% discount to the peer group average of 15.6x. Its price to book ratio of 5.9 is at a significant premium to the industry median of 2.9.

The company has a trailing 12-month ROE of 39.7%, compared with the peer group average of 16.6%. This signifies the efficient reinvestment efforts by the company compared to its peers.

Chart Shows Strength

Eaton Vance Corp. has been continuously outperforming its 200-day moving average and the S&P 500 over the last three months, exhibiting a steady growth trend. The year-to-date return for the stock is 35.6%, compared with the S&P 500’s return of 11.2%.

Headquartered in Boston, Massachusetts, Eaton Vance Corp. is an investment management firm engaged in the creation, marketing and management of investment funds in the United States. The company was founded in 1944 and conducts business through a retail network of national and regional brokers, banks, insurance companies and financial planning firms. Eaton Vance Corp. has a market cap of about $3.6 billion. The Blackstone Group LP (BX) is another Zacks #2 Rank (Buy) stock in the same industry.

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