Why Is Moelis (MC) Down 26.3% Since Last Earnings Report?

It has been about a month since the last earnings report for Moelis (MC). Shares have lost about 26.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Moelis due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Moelis & Company Q4 Earnings Beat, Revenues Down Y/Y

Moelis & Company’s fourth-quarter 2019 adjusted earnings of 38 cents per share easily surpassed the Zacks Consensus Estimate of 25 cents. However, the figure decreased 51% year over year.

Results reflect higher other income and solid liquidity position. However, rise in operating expenses and lower revenues acted as headwinds.

Net income (GAAP basis) was $27.2 million or 38 cents per share, down from $56 million or 72 cents recorded in the prior-year quarter.

In 2019, adjusted earnings of $1.96 per share beat the consensus estimate of $1.83. However, it declined 35% year over year. Net income (GAAP basis) was $135.7 million or $1.89 per share, down from $208 million or $2.78 per share in 2018.

Revenues Decline, Costs Rise

Total revenues in the quarter fell 6% year over year to $223.5 million. The decline was primarily due to lower number of completed transactions, partially offset by higher average fees earned per completed transaction. Nonetheless, the top line surpassed the Zacks Consensus Estimate of $204.5 million.

In 2019, net revenues were $746.5 million, down 16%. However, the figure outpaced the Zacks Consensus Estimate of $733.1 million.

Total operating expenses (adjusted basis) were $201.6 million, up 16% year over year. Increase in both compensation and benefits costs led to this rise.

Other income (adjusted basis) was $6.4 million, up 32% from the year-ago quarter.

As of Dec 31, 2019, the company had cash and liquid investments of $341.8 million.

Share Repurchases

During 2019, Moelis & Company repurchased nearly 1.3 million shares for $51.2 million.

Outlook

Management expects non-compensation expenses to be $38-$39 million for first-quarter 2020.

On an adjusted basis, the company expects underlying corporate effective tax rate in 2020 to be 25%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -9.37% due to these changes.

VGM Scores

Currently, Moelis has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Moelis has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.