Eaton Vance Q2 Profit Up 18%, Results Beat View

(RTTNews) - Investment management company Eaton Vance Corp. (EV) on Wednesday reported an 18 percent increase in profit for the second quarter from last year, reflecting higher investment advisory and administrative fees as well as improved margins.

Both revenue and adjusted earnings per share for the quarter beat analysts' estimates. Assets under management increased 10 percent from last year.

Eaton Vance recorded net outflows of $900 million from long-term funds and separate accounts in the latest quarter, compared to net inflows of $6.6 billion in the prior-year period.

Thomas Faust Jr., Chairman and Chief Executive Officer of Eaton Vance said, "Eaton Vance achieved record earnings in the second quarter and first six months of fiscal 2014. While flows in the first half were disappointing, the rapid development of a number of newer franchises positions us for resumed organic growth."

The Boston, Massachusetts-based company's net income for the second quarter was $74.90 million or $0.59 per share, up from $63.68 million or $0.50 per share in the prior-year quarter.

The prior-year quarter's results reflect increases in the estimated redemption value of non-controlling interests in affiliates redeemable at other than fair value, which reduced earnings by $0.01 per share. In addition, the closed-end fund structuring fees recognized in connection with the $205 million IPO of Eaton Vance Municipal Income Term Trust reduced earnings in the year-ago quarter by $0.01 per share.

Excluding these items, adjusted net income for the latest quarter was $74.90 million or $0.59 per share, compared to $66.02 million or $0.52 per share in the year-ago quarter. On average, 13 analysts polled by Thomson Reuters expected the company to report earnings of $0.56 per share for the quarter. Analysts estimate typically excludes one-time special items.

Revenues for the quarter grew 7 percent to $354.06 million from $331.69 million in the same quarter last year and beat analysts' consensus estimate of $351.44 million.

Investment advisory and administrative fees increased 8 percent to $300.14 million, reflecting 12 percent growth in average consolidated assets under management and lower average effective fee rates.

However, distribution and service fee revenues were collectively down 2 percent, reflecting lower managed assets in fund share classes that are subject to distribution and service fees.

Operating expenses for the quarter increased 2 percent to $228.76 million, reflecting increases in compensation, fund-related and other expenses. These were offset by lower distribution and service fee expenses as well as reduced amortization of deferred sales commissions.

Operating margin improved 280 basis points to 35.4 percent from last year's 32.6 percent.

Eaton Vance's consolidated assets under management as of the end of the latest quarter were $285.87 billion, up 10 percent from $260.28 billion at the end of the prior-year quarter. The increase in ending assets under management from last year reflects net inflows of $10.7 billion and market price appreciation of $14.9 billion.

EV is currently trading at $37.56, up $2.10 or 5.92 percent on a volume of 796,566 shares.