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Why is a Beat Less Likely for Invesco (IVZ) in Q2 Earnings?

Zacks Equity Research

Invesco IVZ is scheduled to announce second-quarter 2019 results on Jul 25, before the market opens. While revenues for the to-be-reported quarter are projected to grow year over year, expenses are likely to decline.

In the last reported quarter, the company’s adjusted earnings surpassed the Zacks Consensus Estimate. Results benefited from improvement in assets under management (AUM) and rise in performance fees.

Invesco doesn’t have an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in only one of the trailing four quarters.

Invesco Ltd. Price and EPS Surprise

Invesco Ltd. Price and EPS Surprise

Invesco Ltd. price-eps-surprise | Invesco Ltd. Quote

Moreover, activities of the company in the second quarter failed to encourage analysts to revise estimates upward. As a result, the Zacks Consensus Estimate for earnings of 57 cents has remained unchanged over the past seven days. Further, the figure indicates a decline of 13.6% from the year-ago quarter’s reported figure.

Notably, the consensus estimate for sales for the to-be-reported quarter is pegged at $1.52 billion, which suggests 11.4% growth from the year-earlier quarter’s reported number.

Now, let’s check the factors that are likely to impact Invesco’s second-quarter results.

Per the monthly metrics data published by Invesco, its preliminary total AUM as of Jun 30, 2019, was $1,197.8 billion, up 25.5% from Mar 31, 2019 level. Moreover, preliminary average AUM as of Jun 30, 2019, totaled $1,055.9 billion (as reported by the company), reflecting rise of nearly 13.2% sequentially.

Thus, given the rise in total and average AUM, performance fees and investment management fees are expected to improve in the second quarter.

On the cost front, Invesco’s initiatives to manage costs and improve efficiency are likely to have led to expense savings in the to-be-reported quarter. However, the company’s inorganic growth strategy and investments in franchise might have resulted in higher operating expenses.

Here’s what our quantitative model predicts:

The chances of Invesco beating the Zacks Consensus Estimate in the second quarter are low. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Invesco is -1.04%.

Zacks Rank: The company currently has a Zacks Rank #3. While this increases the predictive power of ESP, we also need a positive ESP to be confident of an earnings surprise call.

Stocks to Consider

Here are some finance stocks that you may want to consider as these have the right combination of elements to post an earnings beat this quarter, per our model.

Franklin Resources, Inc. BEN is slated to release results on Jul 30. It currently has an Earnings ESP of +0.13% and flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ares Capital Corporation ARCC is slated to release results on Jul 30. It presently has an Earnings ESP of +1.02% and a Zacks Rank #2 (Buy).

Moody's Corporation MCO has an Earnings ESP of +0.65% and carries a Zacks Rank #2 at present. The company is scheduled to release results on Jul 31.

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