JP Morgan Comments On Invesco Ltd. Following Slight Earnings Miss

Invesco IVZ reported 1Q11 EPS of $0.41, $0.03 below JP Morgan's estimate and $0.01 below consensus. Long term sales figures were great, and JP Morgan expects estimates will rise somewhat as lower compensation offsets high distribution expenses. However, the bigger earnings surprise is on track for 3Q11, when JP Morgan expects the closing of WLRoss V to drive incremental revenue and margin growth, pushing IVZ to above a $0.50 EPS run rate. Invesco reported long-term fund sales of $6.6B, from which we back out $0.8 billion of Powershare QQQ to arrive at an impressive $5.8B. This is the best quarter in five years. Sales were broad based across all but active equity funds, which saw a meaningful and high profile $5.2B of redemptions. FX impacts Invesco's higher margin foreign businesses, and a strong GBP, EUR, CAD, AUD and JPY bode well for upcoming releases. UK markets are outperforming US markets, and will help AUM growth and margins. UK tax rate will fall 200bps this quarter, helping Invesco's overall tax rate. JP Morgan has a $31 PT and Overweight rating on IVZ IVZ closed Wednesday at $24.82