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Will an Earnings Beat in Q4 Support Eaton Vance (EV) Stock?

Zacks Equity Research
Updated

Eaton Vance Corp. EV is scheduled to announce fourth-quarter and fiscal 2017 (ended Oct 31) results tomorrow, before the opening bell. Its revenues and earnings are expected to improve year over year.

The company is expected to benefit from increase in revenues supported by its strategic initiatives and a rise in assets under management (AUM). However, higher expenses will likely offset the positives to some extent. The Zacks Consensus Estimate for the quarter’s earnings is 71 cents, up 24.2% year over year.

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

Also, Eaton Vance does not boast an impressive earning surprise history. The company’s earnings surpassed the Zacks Consensus Estimate only once in the trailing four quarters. Thus, the company came up with an average negative surprise of 4.4%.

Eaton Vance Corporation Price and EPS Surprise

 

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

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Further, the company’s shares have rallied 23.7% so far this year, underperforming the industry’s growth of 25.2%. Will the stock’s price performance improve post fiscal fourth-quarter earnings release? Let’s see how things are shaping up.

Why a Likely Positive Surprise?

Our proven model indicates that chances of Eaton Vance beating the Zacks Consensus Estimate is high as it has right combination of two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better.

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 +0.99%.

Zacks Rank: Eaton Vance has a Zacks Rank #2 (Buy), which increases the predictive power of ESP.

Factors at Play

On the revenue front, Eaton Vance is likely to gain from the continued improvement in the global equity markets. Also, AUM is projected witness an improvement during the quarter. As of Sep 30, 2017, the company reported a 3.4% rise in AUM from the Jul 31, 2017 level.

However, pressure on average effective fee rates is likely to hurt growth in investment advisory and administrative fees. Nonetheless, the top line is likely to witness improvement if outflows from higher fee strategies decrease. The Zacks Consensus Estimate for revenues shows 18.1% increase from the prior-year quarter.

On the expense front, Eaton Vance’s NextShares initiative is likely to lead a slight rise in costs during the quarter. Also, the company’s plan to launch new fund products in the United States might result in higher marketing expenses.

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

Other Stocks That Warrant a Look

Some other stocks in the same space worth considering are Ameriprise Financial, Inc. AMP, Invesco Ltd. IVZ and SEI Investments Co. SEIC. All the stocks hold a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ameriprise’s earnings estimates were revised 6% upward for 2017, in the past 30 days. Also, its share price has jumped 42.7% so far this year.

Invesco’s current-year earnings estimates were revised 2.3% upward, over the last 30 days. Further, year to date, its shares have rallied 15.3%.

SEI Investments witnessed a 2.6% upward earnings estimates revision for the current year, in the past 30 days. Moreover, so far this year, its shares have gained 35.9%.

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Invesco PLC (IVZ) : Free Stock Analysis Report
 
AMERIPRISE FINANCIAL SERVICES, INC. (AMP) : Free Stock Analysis Report
 
Eaton Vance Corporation (EV) : Free Stock Analysis Report
 
SEI Investments Company (SEIC) : Free Stock Analysis Report
 
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