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Is Earnings Beat Likely For Eaton Vance (EV) Stock in Q2?

Zacks Equity Research
Updated

We expect Eaton Vance Corp. EV to beat estimates when it reports second-quarter fiscal 2017 (ended Apr 30) results on Wednesday May 24, before the opening bell.

Last quarter, Eaton Vance’s adjusted earnings lagged the Zacks Consensus Estimate. Results were primarily hurt by a rise in expenses, partly offset by higher revenues.

Despite this dismal performance, the company’s shares rose nearly 3% for the three months ended Apr 30, 2017. Also, the Zacks Consensus Estimate remained stable over the last 30 days.

Why a Likely Positive Surprise?

Our proven model shows that Eaton Vance has the right combination of two key ingredients – positive Earnings ESP and a Zacks Rank #3 (Hold) or better – to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The Earnings ESP for Eaton Vance is +3.39%. This is because the Most Accurate estimate of 61 cents is above the Zacks Consensus Estimate of 59 cents.

Zacks Rank: Eaton Vance carries a Zacks Rank #3. This further increase the chances of earnings beat.

Nonetheless, Eaton Vance doesn’t have a decent earnings surprise history. This is evident from the chart below:

Eaton Vance Corporation Price and EPS Surprise

 

Eaton Vance Corporation Price and EPS Surprise | Eaton Vance Corporation Quote

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Factors to Influence Q2 Results

On the revenue front, Eaton Vance is likely to gain from the significant turnaround in the global equity markets. Further, assets under management (AUM) should witness an improvement during the quarter. As of Mar 31, 2017, the company reported a 4.7% rise in AUM from the Jan 31, 2017 level.

However, pressure on average effective fee rates is expected to hamper growth in investment advisory and administrative fees. Nonetheless, the top line is likely to witness a slight improvement in case outflows from higher fee strategies abatement.

On the expense front, Eaton Vance’s NextShares initiative should lead a slight rise in costs during the quarter. Also, the company’s plan to launch new fund products in the U.S. should lead to higher marketing expenses.

Also, non-compensation costs are likely to rise due to higher distribution expenses and fund-related costs. Hence, overall expenses should trend higher in the quarter.

Stocks that Warrant a Look

Some stocks in the financial space worth considering include The Carlyle Group LP CG, Lazard Ltd LAZ and Noah Holdings Limited NOAH. All the stocks hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Carlyle Group’s earnings estimates were revised 50.6% upward for the current year, in the past 30 days. Also, its share price jumped 7.8% over the last one year.

Lazard’s current-year earnings estimates were revised 2.4% upward, over the last 30 days. Further, its shares increased 32.1% in the last one year.

Noah Holdings witnessed a 3.3% upward earnings estimates revision for the current year, in the past 60 days. Moreover in the last one year, its shares gained 23.4%.

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Click for Free Lazard Ltd. (LAZ) Stock Analysis Report >>
 
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