Janus Capital Group, Inc. (JNS) is scheduled to report its third-quarter 2014 results on Thursday, Oct 23, before the market opens.
Aided by higher revenues, Janus Capital reported second-quarter 2014 earnings per share attributable to common shareholders of 19 cents, inching past the Zacks Consensus Estimate by a penny. Better-than-expected results reflected top-line growth and increased assets under management (AUM), depicting stability in earnings. However, net outflows and a rise in operating expenses were headwinds for the quarter.
Will Janus Capital fail to deliver another beat this season? Let’s see how things have shaped up.
Factors to Influence Q3 Results
Janus Capital in its second-quarter 2014 Earnings Conference Call had stated that it expects long-term incentive (LTI) expenses to be $55 million in 2014 while the compensation to revenue ratio, which includes LTI, was estimated to be in the low 40s in the near-to-mid term following the second quarter.
We believe overall expenses of the company may exhibit a rise in the quarter to reflect the company’s continued investments in the technology platform and personnel to boost U.S. retail business. Also, the company has several investments underway, including investment in distribution strategy for non-US business along with establishing its retail business in Taiwan.
The company also mentioned that it remains optimistic about the international business, even though it exhibited some slowdown in the second quarter sequentially. Management remains confident on the international channel as the channel generates positive flows for the company. We believe the international business should continue to contribute to the overall revenues in the third quarter as well.
Investment management fee, which comprises a major source of revenue, has been exhibiting growth in the past several quarters. Given the company’s efforts in sustaining growth in AUM over the past couple of years, we believe growth in AUM should drive higher investment management fee in the third quarter. Further, continued decline in negative performance fees should ease top-line pressure.
Activities of Janus Capital during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained stable at 22 cents per share over the last 7 days.
Earnings Whispers
Our proven model does not conclusively show that Janus Capital is likely to beat the Zacks Consensus Estimate in the upcoming release. This 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 Janus Capital is 0.00%. This is because both the Most Accurate estimate and Zacks Consensus Estimate stand at 22 cents per share.
Zacks Rank #2: Janus’ Capital’s Zacks Rank #2 (Buy), increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise call.
Stocks That Warrant a Look
Here are some stocks in the finance sector you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
CIT Group Inc. (CIT) has an earnings ESP of +11.36% and a Zacks Rank #3. It is slated to report results on Oct 28.
World Acceptance Corp. (WRLD) has an Earnings ESP of +1.38% and carries a Zacks Rank #2. The company is slated to release results on Oct 22.
Arlington Asset Investment Corp. (AI) has an Earnings ESP of +7.34% and sports a Zacks Rank #1. It is scheduled to report results on Oct 27.
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