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Revenue Pressure, High Level of Goodwill to Hurt Invesco (IVZ)
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Invesco Ltd.’s (IVZ - Free Report) top line is expected to be hurt by macroeconomic headwinds amid a challenging operating backdrop. Moreover, considerably high levels of goodwill and intangible assets on the company's balance sheet make us apprehensive.
Analysts are also not optimistic about the company’s earnings growth potential. Over the past 30 days, the Zacks Consensus Estimate for IVZ’s current-year earnings has been revised 7.3% lower. Thus, the company currently carries a Zacks Rank #5 (Strong Sell).
In the past six months, shares of IVZ have lost 12.2% compared with the industry's 1.9% decline.
Image Source: Zacks Investment Research
Looking at its fundamentals, while Invesco’s total operating revenues witnessed a five-year (2017-2022) compound annual growth rate (CAGR) of 3.2%, the metric has been recording a downtrend since the second half of 2020. Revenues declined in the first six months of 2023 as well.
The company’s revenues are likely to be under pressure in the near term despite having a robust institutional pipeline, diverse product offerings and alternative investment strategies, solid retail channels, and synergies from opportunistic acquisitions. We anticipate operating revenues to decline 4.3% in 2023 before rebounding and growing 5.3% in 2024.
Goodwill and intangible assets on Invesco's balance sheet are subject to annual impairment reviews. As of Jun 30, 2023, goodwill and net intangible assets remained considerably high, totaling $15.8 billion (53.6% of total assets). Several factors may initiate the impairment of the book value of such assets, due to which their value may have to be written down. This will affect the company’s financials.
Further, while the company’s expense levels have been manageable, we project total expenses (adjusted) to rise 1.8% in 2023, which might create a near-term headwind.
Nevertheless, synergies from buyouts, diverse product offerings and alternative investment strategies, global presence, and solid assets under management balance are expected to keep aiding the company’s financials.
Stocks Worth a Look
A couple of stocks from the same space worth a look are T. Rowe Price Group, Inc. (TROW - Free Report) and SEI Investments Company (SEIC - Free Report) .
T. Rowe Price currently sports a Zacks Rank #1 (Strong Buy). Its earnings estimates for 2023 have been revised 8.1% upward over the past 60 days. In the past three months, TROW shares have gained 6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings estimates for SEI Investments have been revised 3.8% upward for 2023 over the past 60 days. Shares of SEIC have rallied 7.8% in the past three months. Currently, the company carries a Zacks Rank #2 (Buy).
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Revenue Pressure, High Level of Goodwill to Hurt Invesco (IVZ)
Invesco Ltd.’s (IVZ - Free Report) top line is expected to be hurt by macroeconomic headwinds amid a challenging operating backdrop. Moreover, considerably high levels of goodwill and intangible assets on the company's balance sheet make us apprehensive.
Analysts are also not optimistic about the company’s earnings growth potential. Over the past 30 days, the Zacks Consensus Estimate for IVZ’s current-year earnings has been revised 7.3% lower. Thus, the company currently carries a Zacks Rank #5 (Strong Sell).
In the past six months, shares of IVZ have lost 12.2% compared with the industry's 1.9% decline.
Image Source: Zacks Investment Research
Looking at its fundamentals, while Invesco’s total operating revenues witnessed a five-year (2017-2022) compound annual growth rate (CAGR) of 3.2%, the metric has been recording a downtrend since the second half of 2020. Revenues declined in the first six months of 2023 as well.
The company’s revenues are likely to be under pressure in the near term despite having a robust institutional pipeline, diverse product offerings and alternative investment strategies, solid retail channels, and synergies from opportunistic acquisitions. We anticipate operating revenues to decline 4.3% in 2023 before rebounding and growing 5.3% in 2024.
Goodwill and intangible assets on Invesco's balance sheet are subject to annual impairment reviews. As of Jun 30, 2023, goodwill and net intangible assets remained considerably high, totaling $15.8 billion (53.6% of total assets). Several factors may initiate the impairment of the book value of such assets, due to which their value may have to be written down. This will affect the company’s financials.
Further, while the company’s expense levels have been manageable, we project total expenses (adjusted) to rise 1.8% in 2023, which might create a near-term headwind.
Nevertheless, synergies from buyouts, diverse product offerings and alternative investment strategies, global presence, and solid assets under management balance are expected to keep aiding the company’s financials.
Stocks Worth a Look
A couple of stocks from the same space worth a look are T. Rowe Price Group, Inc. (TROW - Free Report) and SEI Investments Company (SEIC - Free Report) .
T. Rowe Price currently sports a Zacks Rank #1 (Strong Buy). Its earnings estimates for 2023 have been revised 8.1% upward over the past 60 days. In the past three months, TROW shares have gained 6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings estimates for SEI Investments have been revised 3.8% upward for 2023 over the past 60 days. Shares of SEIC have rallied 7.8% in the past three months. Currently, the company carries a Zacks Rank #2 (Buy).