Affiliated Managers Group Inc. (AMG) is scheduled to release third-quarter 2014 results on Nov 3, before the market opens.
In the preceding quarter, the company delivered a 2.3% positive earnings surprise facilitated by improvement in top line as well as strong growth in assets under management (AUM). Moreover, the company reported earnings beats in all four trailing quarters, with an average surprise of 6.8%.
Can Affiliated Managers keep its earnings streak alive this quarter? Let us see how things have shaped up for this announcement.
Factors Influencing Third-Quarter Results
In Jun 2014, Affiliated Managers completed an equity investment in River Road Asset Management, LLC. The acquisition, which seems a strategic fit for Affiliated Managers, is expected to boost revenue generation as well as elevate expenses this quarter. Moreover, the company looks forward to boost top-line growth driven by excellent long-term performance of the company’s affiliates, along with an increase in global demand for its performance-oriented products.
Further, management expects the ratio of earnings before interest, taxes, depreciation and amortization (EBITDA) contribution at end-of-period AUM to be 13.2 basis points for this quarter, on assumptions of a moderate rise in performance fees. This projection includes the closing of the Veritas acquisition (announced in Apr 2014) at the end of the third quarter.
In addition, Affiliated Managers anticipates total interest expenses to be around $22 million and amortization expenses to be nearly $29.2 million in this quarter. Also, intangible-related deferred taxes are expected to be around $20 million.
Expectations of strong contribution from net client cash flows, slightly pressurized by modest contribution from performance fees drove the company’s 2014 guidance for economic net income (ENI) to the range of $11.20–$12.10 per share.
Affiliated Managers’ quarterly activities failed to impress analysts. Hence, the Zacks Consensus Estimate for the quarter remained unchanged at $2.71 per share over the last 7 days.
Earnings Whispers
Our proven model does not conclusively show that Affiliated Managers is likely to beat the Zacks Consensus Estimate in the third 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 Affiliated Managers is 0.00%. This is because the Most Accurate estimate is at par with the Zacks Consensus Estimate of $2.71.
Zacks Rank: Affiliated Managers’ Zacks Rank #4 (Sell) decreases the predictive power of ESP. Moreover, this coupled with a zero ESP makes surprise prediction difficult.
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 ARMOUR Residential REIT, Inc. (ARR) is +53.33% and it has a Zacks Rank #3. The company is slated to report on Nov 3.
American International Group, Inc. (AIG) has an Earnings ESP of +0.93% and holds a Zacks Rank #2. It is scheduled to report on Nov 3.
Nationstar Mortgage Holdings Inc. (NSM) has an Earnings ESP of +3.81% and a Zacks Rank #3. It is scheduled to report results on Nov 6.
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