Will MSCI Q2 Earnings Suffer From Lower Asset-Based Fees?

MSCI Inc. MSCI is set to report second-quarter 2018 results on Aug 2.

The company’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, delivering an average positive surprise of 6.79%.

In the last reported quarter, MSCI delivered a positive earnings surprise of 2.34%. Operating revenues increased 16.6% year over year to $351.3 million, slightly better than the consensus mark.

The Zacks Consensus Estimate for second-quarter earnings has remained steady at $1.28 over the last 30 days, reflecting year-over-year growth of 34.7%. The consensus mark for revenues currently stands at $356.5 million, reflecting year-over-year growth of 12.8%.

Let’s see how things are shaping up for this announcement.

Key Factors to Consider

MSCI is benefiting from the growth of equity ETF-related revenues, non-ETF passive revenues, and exchange-traded futures and options products. The company is also gaining from strong traction in client segments, like wealth management, and banks and broker dealers.

Moreover, strong demand for Environmental, Social and Governance (ESG) products bodes well for the company. MSCI has begun incorporating natural language processing (NLP) and artificial intelligence (AI) capabilities in its ESG products, which will help in smooth data extraction.

Additionally, partnerships with Thomson Reuters and others expand clientele and penetration.

However, assets under management (AUM) in ETFs linked to MSCI declined 2.6% sequentially to $744.7 billion. This is likely to hurt asset-based fees that doesn’t bode well for MSCI’s top-line growth in the to-be-reported quarter.

What Our Model Says

According to the Zacks model, a company with Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

MSCI has a Zacks Rank #4 and an Earnings ESP of -0.26%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks That Warrant a Look

Here are three stocks that you may want to consider as our model shows that these have the right combination of elements to deliver an earnings beat in the to-be-reported quarter.

Turtle Beach HEAR has an Earnings ESP of +57.14% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Vishay Intertechnology VSH has an Earnings ESP of +2.41% and a Zacks Rank #1.

NetApp NTAP has an Earnings ESP of +1.12% and a Zacks Rank #2.

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