Ameriprise Financial, Inc. (AMP) is scheduled to release third-quarter 2014 results tomorrow, Oct 28, after the market closes.
In the preceding quarter, the company delivered a 4.5% positive earnings surprise facilitated by the consistent improvement on the top line as well as sturdy growth in assets under management (AUM). Moreover, the company reported earnings beats in all four trailing quarters, with an average surprise of 6.7%.
Can Ameriprise maintain its earnings streak this quarter? Let us see how things are shaping up for this announcement.
Factors Influencing Q3 Results
Ameriprise’s top line growth has been facing pressure due to continuous net outflows in its Asset Management segment, which is a major source of revenue for the company. We anticipate these total outflows to persist in the upcoming quarters (albeit at a slower pace), continuing the strain on the overall revenues.
Moreover, the asset management company has been witnessing an increasing trend in expenses for several years. Given the company’s aggressive marketing and advertising strategy along with continual recruitment of experienced advisors, its general and administrative expenses as well as compensation expenses are expected to remain elevated in this quarter as well.
Nonetheless, dealing primarily in asset management and advisory businesses, Ameriprise does not face substantial threat from the overall sluggish and low interest rate environment. Further, a strong AUM pipeline as well as escalating demand for advisory services should boost revenue generation.
Ameriprise’s quarterly activities failed to impress analysts. Hence, the Zacks Consensus Estimate for the quarter remained unchanged at $1.98 per share over the last 7 days.
Earnings Whispers
Our proven model does not conclusively show that Ameriprise is likely to beat the Zacks Consensus Estimate in the second quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. Unfortunately, this is not the case here as you can see below.
Zacks ESP: The Earnings ESP for Ameriprise is -1.52%. This is because the Most Accurate estimate of $1.95 is below the Zacks Consensus Estimate of $1.98.
Zacks Rank: Ameriprise’s Zacks Rank #3 however increases the predictive power of ESP. But we also need to have a positive ESP to be confident of an earnings surprise call.
Stocks That Warrant a Look
Here are a few finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.
The Earnings ESP for Portfolio Recovery Associates Inc. (PRAA) is +0.90% and it has a Zacks Rank #2. The company is slated to report on Oct 29.
CIT Group Inc. (CIT) has an Earnings ESP of +11.36% and holds a Zacks Rank #3. It is scheduled to report on Oct 28.
GAIN Capital Holdings, Inc. (GCAP) has an earnings ESP of +125.0% and holds a Zacks Rank #3. It is scheduled to report results on Oct 30.
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