Driven by strong top-line growth and net inflows, Invesco Ltd. (IVZ) reported third-quarter 2014 adjusted earnings of 64 cents per share. It surpassed the Zacks Consensus Estimate by 2 cents, marking the fifth consecutive earnings beat. This also came in 16.4% above the prior-year quarter figure.

Higher revenues as well as long-term net inflows, partially offset by elevated expenses, facilitated the better-than-expected results. Consistent growth in assets under management (AUM.TO) along with steady capital deployment activities continued to be the strong factors.

On a GAAP basis, net income attributable to common shareholders came in at $256.0 million or 59 cents per share, compared with $228.1 million or 51 cents in the year-ago quarter.

Performance in Detail

Adjusted net revenue climbed 11.9% year over year to $913.7 million. The rise was owing to an increase in all the components of revenue. However, the figure came below the Zacks Consensus Estimate of $1.3 billion.

Adjusted operating expenses increased 8.9% year over year to $531.8 million. The surge in expenses was attributable to a rise in all expense components.

Adjusted operating margin for the quarter stood at 41.8% versus 40.2% in the year-ago quarter.

As of Sep 30, 2014, AUM rose 5.9% year over year to $789.6 billion. Average AUM for the quarter totaled $801.7 billion, up 9.9% from the prior-year quarter. Moreover, long-term net inflows amounted to $6.0 billion compared with an inflow of $5.0 billion in the prior-year quarter.

As of Sep 30, 2014, cash and cash equivalents summed $1,352.6 million, compared with $1,331.2 million as of Dec 31, 2013. Total long-term debt stood at $1,589.1 million as of Sep 30, 2014, almost unchanged compared with the Dec 31, 2013 level.

Capital Deployment Activities

In the reported quarter, Invesco repurchased shares worth $50.0 million at an average price of $39.70 per share.

Concurrent with the earnings release, Invesco announced a quarterly cash dividend of 25 cents per share. The dividend will be paid on Dec 5 to shareholders of record as on Nov 18, with an ex-dividend date of Nov 14.

Our Take

Invesco remains well positioned to benefit from the improved global investment flows on the back of its diversified footprint and product offering. The company’s enhanced capital deployment activities will continue to boost investors’ confidence in the stock.

However, high debt levels and a constant rise in operating expenses are expected to adversely affect Invesco’s performance in the upcoming quarters. Though the company has initiated measures to curb costs, the impact is not expected to be felt any time soon as Invesco continues to invest in franchise.

Currently, Invesco carries a Zacks Rank #3 (Hold).

Performance of Other Investment Managers

Strong top-line growth drove BlackRock, Inc.’s (BLK) third-quarter 2014 adjusted earnings of $5.21 per share, which outpaced the Zacks Consensus Estimate of $4.71.

Waddell & Reed Financial Inc.’s (WDR) third-quarter adjusted earnings per share of 94 cents surpassed the Zacks Consensus Estimate by 2 cents aided by consistent improvement in top line.

However, The Blackstone Group L.P.’s (BX) third-quarter economic net income (ENI) of 66 cents per share missed the Zacks Consensus Estimate of 78 cents, due to elevated expenses.

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