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

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.