On Tuesday, Evercore Partners (NYSE:EVR) received an upgrade from Goldman Sachs (NYSE:GS), with the investment firm's stock rating moving from Neutral to Buy. The new price target has been set at $276.00, indicating a potential 16% upside compared to the 7% average across Goldman Sachs' coverage.
Goldman Sachs predicts that Evercore will continue to achieve above-average growth and increase its market share as the company's investments begin to pay off. This growth is attributed to Evercore's positioning in the most successful segments of the financial cycle.
The firm is expected to see its top line grow by 16% per annum from the year 2024 through 2026, outpacing the 10% growth forecasted for its peers.
The analyst notes that Evercore stands out with best-in-class margins, maintaining a four percentage point advantage over its competitors during the same period.
This margin benefit is partly due to approximately 4.5 percentage points of compensation leverage from 2024 to 2026, compared to about 3.6 percentage points for its peers. This leverage is expected due to stronger growth and a lower fixed compensation to revenue ratio.
The consensus on Evercore's cash balances is seen as too conservative by Goldman Sachs. The firm foresees a 120% and 26% upside to the Street's 2025 and 2026 net buyback estimates, respectively, and a 6% and 14% upside to declared share payouts.
Evercore is also projected to lead in earnings per share (EPS) growth, with a 42% increase from 2024 to 2026, compared to 25% for its peers. Goldman Sachs models an 11% and 5% upside to the consensus EPS estimates for the fifth through eighth quarters of 2026.
Lastly, the analysis points out that Evercore's stock trades at approximately three times less than its peers. Over the long term, it has seen a relative de-rating of more than 4.5 times. With Evercore's best-in-class growth and an increasing advisory revenue contribution, the firm is expected to outperform.
The target price-to-earnings (P/E) ratio of 16.5x is about 0.5x below the average P/E ratio of its peers, and this suggests a significant re-rating in line with pure play peers.
In other recent news, Evercore Inc. has reported record second-quarter adjusted net revenues of $695 million, marking a significant year-over-year increase.
This surge is largely attributed to a 52% increase in adjusted advisory fees, totaling $568 million, reflecting Evercore's involvement in several substantial global transactions. The company has also returned $396 million to shareholders through dividends and share repurchases in the first half of the year.
Evercore ISI, a division of Evercore, recently appointed Adam Frisch as a senior managing director, bolstering its research capabilities in the financial technology and IT services sectors. Frisch brings over two decades of experience and a unique blend of analytical and executive expertise.
Analysts note Evercore's robust position in the M&A advisory market and anticipate market recovery to persist through 2024 and 2025. The firm's focus on expanding client coverage, product capabilities, and investment in its European operations points to a promising outlook for Evercore's financial performance.
InvestingPro Insights
Following the upgrade by Goldman Sachs, Evercore Partners (NYSE:EVR) shows promise with its financial stability and growth potential. According to InvestingPro data, Evercore has a market capitalization of $10.23 billion and trades at a P/E ratio of 30.26, which aligns with the high earnings multiple highlighted by InvestingPro Tips. This valuation is supported by a solid revenue growth of 5.83% over the last twelve months as of Q2 2024, and a remarkable gross profit margin of 93.82%, reinforcing Goldman Sachs' commentary on the firm's best-in-class margins.
InvestingPro Tips further reveal that Evercore has raised its dividend for 17 consecutive years and maintained dividend payments for 18 consecutive years, which may interest investors looking for consistent dividend-paying stocks. Additionally, the company's strong return over the last three months, with a price total return of 23.3%, and a robust one-year price total return of 73.49%, substantiate Goldman Sachs' optimistic outlook on the stock.
For readers interested in a deeper dive into Evercore's financials and future prospects, there are additional InvestingPro Tips available at https://www.investing.com/pro/EVR. These insights could provide a valuable perspective for those considering Evercore as part of their investment portfolio.
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