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MSCI Q4 Earnings to Gain on Solid Demand for ESG & Analytics

Zacks Equity Research

MSCI Inc. MSCI is set to report fourth-quarter 2018 results on Jan 31.

The company’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, delivering average positive surprise of almost 6%.

In the last reported quarter, MSCI reported adjusted earnings of $1.35 per share, which beat the Zacks Consensus Estimate by a nickel and surged 35% year over year. Operating revenues increased 11% year over year to $357.9 million, but lagged the consensus mark of $359 million.

The Zacks Consensus Estimate for fourth-quarter earnings has remained steady at $1.30 over the past seven days, reflecting year-over-year growth of 13%. The consensus mark for revenues currently stands at roughly $361 million, reflecting year-over-year growth of 7.8%.

Let’s see how things are shaping up for this announcement.

Key Factors to Consider

MSCI is benefiting from growth in equity ETF-related revenues, non-ETF passive revenues, and revenues from exchange-traded futures and options products. The company is also gaining from strong traction in client segments like wealth management, and banks and broker dealers.

Further, strong demand for Environmental, Social and Governance (ESG) products bodes well for the company. Consumers are using ESG solutions to identify companies that lack transparency, engage in socially unacceptable behavior, damage the environment, or are governed in ways not aligned with shareholder interest. This is driving ESG products and services sales.

MSCI Inc Price and EPS Surprise

 

MSCI Inc Price and EPS Surprise | MSCI Inc Quote

Notably, MSCI has completed integration of ESG in all its risk analytics systems. This is likely to drive demand for the company’s multi-asset class risk and performance analytics solution. Notably, during the third quarter, the company inked deals with a U.S. asset manager and the derivative structuring desk of a major European bank. Additionally, a very large Asian security firm licensed the company’s WealthBench offering.

Additionally, MSCI is likely to gain from solid growth in recurring subscriptions. Moreover, higher asset-based fees due to strong inflows are likely to drive top-line growth.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

MSCI has a Zacks Rank #3 and an Earnings ESP of +0.97%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks That Warrant a Look

Here are three more stocks you may want to consider as our model shows that these have the right combination of elements to deliver an earnings beat in the to-be-reported quarter.

Twitter TWTR has an Earnings ESP of +13.03% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lumentum Holdings LITE has an Earnings ESP of +1.10% and a Zacks Rank #2.

Square SQ has an Earnings ESP of +6.60% and a Zacks Rank #2.

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