Evercore Inc.’s EVR efforts to boost its client base in advisory solutions and diversify revenue sources are expected to support its top-line growth over the long term. Also, a rebound in mergers and acquisition (M&A) activities, and a robust pipeline are likely to drive investment banking revenues. However, escalating costs are likely to limit bottom-line growth in the long term.

EVR’s Tailwinds

Improving M&A Trend to Support IB Revenues: Evercore generates most of its revenues from the investment banking (IB) business. The metric witnessed a compound annual growth rate (CAGR) of 5.9% from 2017-2023, with the rising trend continuing in the first nine months of 2024. With the recovery in the financing activity, capital raising and transaction activity is picking up. Global mergers and acquisitions in 2024 showed improvement after subdued 2023 and 2022, with deal value and volume maintaining decent levels. This may lead to a positive outlook for M&A activities and has likely driven the company’s backlogs. With this, EVR’s IB business is likely to improve in the upcoming period.

Strong Balance Sheet: The company maintains a strong balance sheet. As of Sept. 30, 2024, cash and cash equivalents were $533.1 million, and investment securities and certificates of deposit were $1.3 billion. Total notes payable was $375.9 million as of the same date. Moreover, current assets exceeded current liabilities by $1.6 billion.

Superior Return on Equity (ROE): EVR’s trailing 12-month return on equity (ROE) reflects its superiority in terms of utilizing its shareholders’ funds. The company’s ROE of 20.38% compares favorably with the industry’s average of 11.60%.

Impressive Capital Distribution: Evercore remains committed to enhancing its shareholders’ value, as seen from its involvement in steady capital distribution activities. In April 2024, the company sequentially hiked its dividend 5% to 80 cents per share. In February 2022, it was authorized with a share-repurchase program worth $1.4 billion with no expiration date. As of Sept. 30, 2024, shares worth $4.4 million were available under the authorization.

The company’s solid balance sheet and strong liquidity position indicate that its capital distribution activities are sustainable.

Headwinds for Evercore

Rising Costs: Evercore’s expenses have witnessed a CAGR of 3.5% over the last five years (ended 2023), with an uptrend continuing in the first nine months of 2024. Though expenses declined in 2022 and 2023 due to a fall in employee compensation and benefit expenses, the compensation ratio will likely be stable in the upcoming quarters. A steady rise in costs is expected to impede bottom-line growth.

Intense Competition: The financial advisory market faces intense competition and impels companies to keep pace with the changing trends. Evercore faces competition from other large and established financial institutions, with greater name recognition and the ability to offer a wider range of products, which enhance their competitive position. The latest entries into the market could create additional pricing and competitive pressures, which might affect its results.

EVR’s Price Performance & Zacks Rank

Over the past six months, shares of this Zacks Rank #3 (Hold) company have rallied 32.1%, outperforming the industry's 16.6% rise.

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Finance Stocks Worth Considering

Some better-ranked peer stocks are Robinhood Markets, Inc. HOOD and Raymond James Financial, Inc. RJF.

Estimates for HOOD’s current-year earnings have been revised upward in the past 30 days to 80 cents per share. The company’s shares have gained 62.8% in the past six months. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Estimates for RJF’s current-year earnings have been revised upward in the past 30 days to $10.92 per share. The company’s shares have risen 29.1% in the past six months. It currently carries a Zacks Rank #2 (Buy).

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