Money management companies such as Invesco (IVZ) see revenues and profits fluctuate with the amount of assets under management. As a result, the relationship of profits to assets produces results which reflect the rise and fall of the overall markets.
The primary business of Invesco is the sponsorship and management of mutual funds and ETFs. Company brands include the Invesco family of funds and the Invesco PowerShares ETFs. Invesco also provides private money management services.
Approximately 70 percent of Invesco's customer base is in the United States. The balance is spread through Europe, Asia, Canada and the U.K. Retail customers make up 59 percent of assets, institutional customers are 38 percent and personal wealth management accounts for the remaining 3 percent.
Of the assets under management, 42 percent is in stocks, 25 percent is fixed income, 12 percent is in money markets and the remaining 21 percent is alternative and balanced investment choices.
For the fiscal third quarter of 2011, Invesco earned operating income of 42 cents per share on net revenues of $706 million, up from $682 million and 39 cents a year earlier. In the second quarter of 2011, Invesco earned 44 cents per share on revenues of $752 million.
For the full year, the consensus earnings forecast is $1.65 compared to $1.38 in 2010.
Rise and fall
At the end of the third quarter, Invesco had assets under management of $598 billion, down 8.5 percent from $654 billion at the end of the previous quarter. During the quarter, net inflows were $2.2 billion as long term funds took in $3.3 billion and the money markets had $1.1 billion in net withdrawals.
The decline in total assets was due primarily to $42 billion in market losses on the stock portfolios. Invesco's revenues are directly tied to the assets under management, so a market decline leads to lower revenues and a rising market pumps up revenues.
The most recent analyst action on IVZ comes from the Barclay Capital analysts, who reiterated their overweight rating on the stock. The analysts target price is about 50 percent above the current share price.
The company next reports on Jan. 27.
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