Investment Managers Earnings on Jul 28: IVZ, BEN, PFG, FII
Most of the investment managers (part of the broader Finance sector) who have reported second-quarter numbers so far have missed earnings estimates on lower revenues, reversing a string of steady performances delivered over the last couple of years. Also, the strengthening of the U.S. dollar affected the global diversified assets under management (AUM) mix.
Though a recovery at the end of June was witnessed from the widespread sell-off on Brexit concern, it was not enough to sustain the uptrend in the investment management space for a long period. Investors have also been fretting over the uncertainty regarding interest rate hike and several other macro headwinds. The unfavorable impact of foreign exchange rates associated with the UK referendum is also adding to the woes by acting as a deterrent.
Conversely, during the quarter, fixed income generated positive returns as investors ran for safe-haven assets. Consequently, fixed income prices increased, which resulted in reduced yields. Notably, following the end of the second quarter, the 10-Year Treasury yields came in at a new all-time low of 1.37% leading to AUM for many investment managers to escalate as of Jun 30, 2016.
Notably, some investment managers, including Janus Capital Group, Inc. JNS, T. Rowe Price Group, Inc. TROW and BlackRock, Inc. BLK, who have released their results have missed estimates despite recording AUM growth.
Let’s take a look at the four major investment management stocks that are scheduled to release their results on Jul 28.
Franklin Resources, Inc. BEN is scheduled to report fiscal third-quarter 2016 (ended Jun 30) results before the opening bell. Given the company’s continued investments in several areas, including strategic beta ETF, liquid alternatives and related solutions, bottom-line growth is likely to be impacted by higher expenses in the quarter. Nevertheless, we believe the company’s top line should be aided by its diversified portfolio offerings and global presence (read more: Is Franklin Likely to Disappoint This Earnings Season?).
Notably, Franklin recorded a negative earnings surprise in each of its trailing four quarters, with an average miss of 8.26% as depicted in the chart below:
FRANKLIN RESOUR Price and EPS Surprise
FRANKLIN RESOUR Price and EPS Surprise | FRANKLIN RESOUR Quote
Federated Investors, Inc. FII is set to announce its results after the market closes. The Zacks Consensus Estimate of 47 cents for the company for the upcoming release displays year-over-year growth of about 17.50%. Federated’s activities during the quarter were enough to win the analysts’ confidence, as is evident from one positive revision in earnings estimates (versus no negative revision) over the last 30 days. Notably, the Zacks Consensus Estimate remained unchanged over the same time frame.
Moreover, our proven quantitative model predicts an earnings beat is most likely. The company has a Zacks Rank #3 (Hold) with an Earnings ESP of +2.13%.
Federated recorded positive earnings surprises in all the trailing four quarters, with an average positive surprise of 4.89%, as shown in the chart below:
FEDERATED INVST Price and EPS Surprise
FEDERATED INVST Price and EPS Surprise | FEDERATED INVST Quote
Principal Financial Group Inc. PFG is expected to beat expectations when it reports second-quarter 2016 results, after the market closes. The company has a Zacks Rank #2 (Buy) with an Earnings ESP of +0.94%. Principal Financial is likely to witness AUM growth in the to-be-reported quarter, primarily due to its extensive distribution presence, best-in-class solutions and operational discipline. Further, the company is likely to experience improvement in operating earnings, owing to a solid performance at the company’s businesses across most lines and segments. In addition, cost-saving initiatives undertaken by the company in the quarter should sustain the bottom line.
However, the company’s investment results are likely to have suffered due to a low interest rate environment along with an unfavorable currency exchange and volatile equity markets adding to its woes (read more: Principal Financial Q2 Earnings: Will the Stock Gain?).
Meanwhile, Principal Financial has a negative average surprise of 0.25% for the trailing four quarters, having lagged the Zacks Consensus Estimate in three quarters as demonstrated in the chart below:
PRINCIPAL FINL Price and EPS Surprise
PRINCIPAL FINL Price and EPS Surprise | PRINCIPAL FINL Quote
Invesco Ltd. IVZ is slated to release results, before the market opens. Despite initiating a business transformation program, Invesco should witness a rise in operating expenses, given the continuous investment in franchise. Further, incremental implementation costs associated with its business transformation program are anticipated to be nearly $85 million in 2016. So, a certain portion of this expense should be reflected in the upcoming release. On the revenue front, the strengthening dollar should exert pressure on Invesco’s assets under management mix and management fees (read more: Invesco Q2 Earnings: What to Expect from the Stock?).
With respect to the surprise trend, Invesco posted negative surprises in three of the last four quarters, with an average miss of 3.55%, as shown in the chart below:
INVESCO LTD Price and EPS Surprise
INVESCO LTD Price and EPS Surprise | INVESCO LTD Quote
With a tough economic environment and volatile markets, irrespective of an earnings beat or miss, investors should focus on the companies’ fundamentals and check our full write-up on earnings releases of these stocks later.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
JANUS CAP GRP (JNS): Free Stock Analysis Report
T ROWE PRICE (TROW): Free Stock Analysis Report
INVESCO LTD (IVZ): Free Stock Analysis Report
FEDERATED INVST (FII): Free Stock Analysis Report
FRANKLIN RESOUR (BEN): Free Stock Analysis Report
BLACKROCK INC (BLK): Free Stock Analysis Report
PRINCIPAL FINL (PFG): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
