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Eaton Vance (EV) Q3 Earnings: What's in Store for the Stock?

Zacks Equity Research

Eaton Vance Corp. EV is scheduled to report third-quarter fiscal 2016 (ended Jul 31) results on Wednesday Aug 17, before the opening bell.

Last quarter, Eaton Vance’s adjusted earnings surpassed the Zacks Consensus Estimate. Results benefited from a decline in expense, partly offset by lower revenues.

Earnings Whispers

Eaton Vance doesn’t have a decent surprise history as indicated from the chart below:
 

EATON VANCE Price and EPS Surprise

EATON VANCE Price and EPS Surprise | EATON VANCE Quote

 

Nonetheless, our proven model indicates that Eaton Vance is likely to beat the Zacks Consensus Estimate in fiscal 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 an earnings beat. This is the case here, as elaborated below.

Zacks ESP: The Earnings ESP for Eaton Vance is +1.82%. This is because the Most Accurate estimate of 56 cents stands above the Zacks Consensus Estimate of 55 cents.

Zacks Rank: Eaton Vance has a Zacks Rank #2. This further increases the chance of an earnings beat.

Notably, the Zacks Consensus Estimate has remained stable over the last seven days.

Factors to influence Q3 Results

On the revenue front, Eaton Vance is likely to benefit from the modest turnaround in the global equity markets. Further, assets under management should witness improvement during the quarter.

However, we anticipate lower average effective fee rates to hamper growth in investment advisory and administrative fees. Nonetheless, the top line will likely to witness a slight improvement in case outflows from higher fee strategies abate.

Moreover, management expects operating margin to improve modestly, given higher managed assets as of Apr 30, 2016 and continuing controlled discretionary spending costs.

On expense front, Eaton Vance’s NextShares initiative will likely push costs up during the quarter. Also, the company’s plan to launch new fund products in the U.S. should lead to higher marketing expenses. Moreover, we believe non-compensation costs are likely to increase due to a rise in distribution expenses and fund-related costs. Hence, overall expenses should trend higher in the quarter.

Stocks That Warrant a Look

A couple of other favorably-ranked finance stocks include Comerica Incorporated CMA, Hancock Holding Company HBHC and HomeStreet, Inc. HMST, both sporting a Zacks Rank #1.

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EATON VANCE (EV): Free Stock Analysis Report
 
HOMESTREET INC (HMST): Free Stock Analysis Report
 
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