Invesco Ltd. (IVZ) is scheduled to report fourth-quarter and full year 2014 results on Jan 29, before the market opens.
Last quarter, Invesco delivered a positive earnings surprise of 3.2% on the back of top-line growth, driven by an impressive rise in investment management fees. This was, however, partly offset by higher expenses. Notably, this asset manager has delivered a positive earnings surprise over the last four trailing quarters, with an average beat of 6.54%.
Will Invesco be able to keep its earnings streak alive? Or will it disappoint this time? Let us see how things have shaped up for this announcement.
Factors Impacting Q4 Results
Invesco’s inability to check expenses remains a major concern for us. In the quarter, management projects compensation expenses to remain stable sequentially, on expectations of AUM remaining flat. Notably, marketing expenses are anticipated to reach $35 million on account of an increased emphasis on EMEA-specific marketing strategy.
Further, property, office and technology expenses will rise to roughly $80–$82 million, mainly due to sustained technology investments, expansion of Hyderabad office and costs related to enhanced sales in Europe. Also, general and administrative expenses are estimated in the range of $73–$75 million, owing to business expansion plans and launch of new products. Overall, these activities are anticipated to keep operating expenses toward the higher side.
Nevertheless, 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 continue to improve, as major U.S. equity indexes witnessed an uptick during the quarter and Invesco has benefited from this trend. Hence, overall total revenue should grow, backed by a rise in investment management fees.
Invesco’s activities during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate remained stable at 62 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 fourth 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 -1.61%. This is because the Most Accurate estimate of 61 cents stands below the Zacks Consensus Estimate of 62 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 Ameriprise Financial, Inc. (AMP) is +0.45% and it has a Zacks Rank #3. The company is slated to report on Jan 28.
T. Rowe Price Group, Inc. (TROW) has an Earnings ESP of +0.89% and a Zacks Rank #3. It is scheduled to report results on Jan 28.
Lazard Ltd. (LAZ) has an Earnings ESP of +1.91% and holds a Zacks Rank #3. It is expected to report on Feb 5.
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