Investment Managers' Q2 Earnings Slated on Jul 26: IVZ, PFG
The earnings season is gathering momentum, with results so far indicating an impressive performance (both on earnings and revenues front). Thus, investors are keen to know how the companies are expected to perform.
The investment management industry, part of the broader Finance sector, is expected to witness decent growth. The financial performance of the companies in the industry largely depend on the overall performance of the markets.
For the April-June quarter, equity markets performed decently, with the S&P 500 Index recording a rise of 3.3%. Thus, this is expected to lead to an increase in assets under management (AUM). Therefore, the related fees are also expected to record a rise, boosting revenues.
On the cost front, as investment managers continue investing in technology with an aim to provide better services, operating expenses will likely witness an increase.
Some of the major players in the investment management industry like BlackRock (BLK) and Blackstone (BX) and a few others have already reported second-quarter results. The earnings performance has been solid so far, driven by rise in AUM and steady inflows that have resulted in revenue growth.
Per the latest Earnings Preview, overall earnings for the finance sector for the quarter are expected to grow 24.7% year over year. This compares unfavorably with the prior-quarter growth of 25.1%.
Also, our quantitative model offers some insights into stocks that are about to report earnings. Per the model, in order to be confident of an earnings beat, a stock needs to have the right combination of the two main ingredients — a positive Earnings ESP and 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.
Therefore, against the above-mentioned operating backdrop, let’s see how Invesco IVZ and Principal Financial Group, Inc. PFG, which are slated to announce second-quarter results tomorrow, will likely perform.
Invesco will release results before the market opens. Per the monthly metrics data, the company’s preliminary AUM in the to-be-reported quarter was up sequentially. Notably, the Zacks Consensus Estimate for AUM of $976 billion reflects 4.5% increase from the prior quarter.
Thus, given the increase in AUM, the related fee is expected to witness some improvement. In fact, management projects performance fees for the second quarter to be around $10-$15 million, up from $9.1 million reported last quarter.
The consensus estimate for sales for the to-be-reported quarter is $1.40 billion indicating growth of 11.6% year over year.
However, operating expenses are expected to rise in the quarter. Management expects compensation expenses, marketing costs, and property, office and technology costs to increase on a sequential basis.
Notably, the chances of Invesco beating the Zacks Consensus Estimate are low this time. The company has an Earnings ESP of +0.07% and currently carries a Zacks Rank #4 (Sell). (Read more: Why is an Earnings Beat Less Likely for Invesco in Q2?)
Nevertheless, Invesco has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 4.2%.
Invesco Ltd. Price and EPS Surprise
Invesco Ltd. Price and EPS Surprise | Invesco Ltd. Quote
Principal Financial, which will come out with results after the market closes, is expected to report growth in revenues in the second quarter, driven by its fee-based revenue sources, probable segmental revenue growth and an improved investment income. The Zacks Consensus Estimate for revenues is pegged at $3.6 billion, indicating 9.4% increase on a year-over-year basis.
Further, the company is expected to witness improvement in AUM during the to-be-reported quarter, given strong segmental performance and strategic acquisitions. However, the company will likely record an increase in total expenses, mainly due to higher benefits, claims and settlement expenses as well as operating costs.
Notably, the Zacks Consensus Estimate for earnings is pegged at $1.38 per share, reflecting a 5.3% rise from the year-ago quarter. (Read more: Principal Financial Q2 Earnings: What's in the Cards?)
Nonetheless, our proven model does not conclusively show that Principal Financial is likely to beat on earnings this quarter. The company has an Earnings ESP of 0.00% and currently carries a Zacks Rank #4.
(You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.)
Also, Principal Financial doesn’t have an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters with the average negative surprise of 0.7%.
Principal Financial Group, Inc. Price and EPS Surprise
Principal Financial Group, Inc. Price and EPS Surprise | Principal Financial Group, Inc. Quote
Check later for our full write-up on earnings releases of these stocks.
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