--Evercore swings to first-quarter profit; investment banking
revenue climbs
--Company misses analysts' estimates on higher costs
--Executive chairman says M&A environment is a "perfectly
good and stable one by historical standards."
(Updates with information on M&A environment, investment
banking business, comments from executives throughout.)
By Brett Philbin
Evercore Partners Inc. (EVR) swung to a first-quarter profit as
its investment-banking revenue climbed 55% from a year ago and
company executives expressed a more optimistic view of the
merger-and-acquisition market than its rivals.
The boutique's results, though, missed analysts estimates as its
costs rose, sending shares of the company down 1.4% to $36.34 in
Wednesday morning trading. The stock is up 20% year-to-date, though
it has pulled back nearly 20% over the past month.
Evercore relies heavily on the health of the M&A market as
bankers in its core business earn fees from such transactions and
other advisory work.
While 2013 began with much fanfare with several large deal
announcements, that enthusiasm has waned over the past few months
as Wall Street focused instead on a decline in the number of
reported transactions. Deals are down around the globe as the
confidence of chief executives remains dimmed by the recent fiscal
turmoil in Europe and a slow-moving economic recovery in the
U.S.
During a conference call with analysts though, Evercore founder
and Executive Chairman Roger Altman took a middle-of-the-road view
on the M&A environment. He said that it is neither "white hot"
nor "cold," but rather a "perfectly good and stable one by
historical standards."
For the quarter ended March 31, Evercore posted a profit of $6
million, or 16 cents a share, compared with a loss of $3.4 million,
or 12 cents a share, a year earlier.
Evercore's adjusted earnings from continuing operations--the
figure analysts use to evaluate the company--were 37 cents, up from
10 cents a year earlier.
Net revenue jumped 47% to $151.4 million and was $153.4 million
on an adjusted basis.
Analysts polled by Thomson Reuters had expected adjusted
earnings of 45 cents on revenue of $163 million.
Evercore said its compensation and benefits costs rose 26%,
while its total expenses climbed 19%. In the first quarter, the
company paid out 59.7% of its revenue for compensation and benefits
on an adjusted basis, down from 63%, a year earlier.
Within investment banking, Evercore said its revenue rose to
$131.4 million, up from $84.5 million the year before, though off
33% from the fourth quarter. The large sequential decline was the
result of many clients accelerating their dealmaking activity prior
to the end of 2012 to avoid higher tax rates this year.
During the first quarter, Evercore advised Dell Inc.'s (DELL)
board on competing takeover bids, including a $24.4 billion buyout
offer by the computer maker's founder and CEO, Michael Dell, and
Silver Lake Partners. Evercore also advised
telecommunications-software provider Tekelec on its proposed sale
to Oracle Corp. (ORCL).
On the call, analysts peppered Mr. Altman and CEO Ralph
Schlosstein with questions about M&A, noting that deal volumes
were off compared with the fourth quarter and that some competitors
have already posted relatively muted advisory revenues for the
first quarter.
In particular, rival Greenhill & Co. (GHL) said last week
that the merger market has been muted, contrary to perception
shaped by a few splashy deals announced earlier this year.
Commenting on that trend, Mr. Altman acknowledged that while
Evercore has seen better M&A environments, "we've seen a lot
worse ones" as well and said he believes the company should "have a
strong year" in the current conditions.
During the first quarter, Evercore was involved in 37 publicly
announced transactions, comprising $45.8 billion of aggregate
transaction value, Mr. Altman said in a statement, noting that the
period "represents one of our best quarters since the economic
recovery began, based on both the number and the dollar volume of
announced transactions."
The firm said it advised on 26 transactions that generated fees
in excess of $1 million, compared with 17 a year ago and 48 in the
fourth quarter.
Meanwhile, Evercore's capital markets business completed 12
transactions in the quarter, helping to raise more than $6 billion
of capital, which the firm characterized as the best quarter since
the business was launched a few years ago.
--Saabira Chaudhuri contributed to this report.
Write to Brett Philbin at brett.philbin@dowjones.com
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