Invesco Ltd. IVZ is scheduled to report first-quarter 2015 results on Apr 28, before the market opens.
Last quarter, Invesco’s adjusted earnings surpassed the Zacks Consensus Estimate on the back of strong top-line growth. This was, however, partly offset by higher expenses.
Will Invesco be able to keep its earnings streak alive this time? Or will it disappoint? Let us see how things have shaped up for this announcement.
Factors Impacting Q1 Results
Invesco’s inability to check expenses remains a major concern. Management anticipates a rise in compensation expenses for the quarter. Notably, marketing expenses are projected to reach $35 million owing to an increased emphasis on EMEA-specific marketing strategy.
Further, property, office and technology expenses will rise to roughly $80 million, mainly led by sustained technology investments, expansion of Hyderabad office and costs related to enhanced sales in Europe. Also, general and administrative expenses will remain stable at $75 million, due to business expansion plans and launch of new products. Overall, these activities are anticipated to keep operating expenses on the higher side.
Notably, dealing primarily in asset management business, Invesco does not face substantial threat from the overall low interest rate environment.
We believe that investment management fees should improve, as major U.S. equity indexes witnessed an uptick during the quarter and Invesco has benefited from this trend. However, strengthening of the U.S. dollar against other currencies will marginally dent growth in management fee.
Hence, we expect total revenue to increase, backed by a rise in performance fees.
Invesco’s activities during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate remained stable at 60 cents per share over the last 7 days.
Earnings Whispers
Our proven model does not conclusively show that Invesco is likely to beat the Zacks Consensus Estimate in the first quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least #2 (Buy) or #3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: The Earnings ESP for Invesco is 0.00%. This is because the Most Accurate estimate of 61 cents stands below the Zacks Consensus Estimate of 60 cents.
Zacks Rank: Invesco’s Zacks Rank #3 increases the predictive power of ESP. But we also need to have a positive ESP to be confident of an earnings surprise call.
Stocks to Consider
Here are a few finance stocks 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 The Carlyle Group LP CG is +22.81% and it has a Zacks Rank #3. The company is slated to report on Apr 29.
Oaktree Capital Group, LLC OAK has an Earnings ESP of +7.94% and holds a Zacks Rank #3. It is expected to report on Apr 30.
Fortress Investment Group LLC FIG has an Earnings ESP of +9.09% and a Zacks Rank #3. It is scheduled to report results on May 7.
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