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Why is an Earnings Beat Less Likely for Invesco (IVZ) in Q1?

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Invesco Ltd. IVZ is slated to release first-quarter 2018 results tomorrow before the market opens. Its revenues and earnings are projected to grow year over year.

Last quarter, the company’s adjusted earnings surpassed the Zacks Consensus Estimate. Results were primarily driven by an increase in revenues and long-term inflows, partially offset by higher expenses.

Moreover, Invesco has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 6.4%.

Invesco Ltd. Price and EPS Surprise
 

Invesco Ltd. Price and EPS Surprise | Invesco Ltd. Quote

However, activities of the company in the first quarter failed to encourage analysts to revise estimates upward. As a result, the Zacks Consensus Estimate for earnings of 67 cents decreased 2.9% over the last 30 days. Nevertheless, the figure reflects year-over-year improvement of 9.8%.

Also, the Zacks Consensus Estimate for sales for the to-be-reported quarter is $1.37 billion, which reflects growth of 14.6% year over year.

Invesco’s price performance does not seem very impressive. Its shares have lost 20.2% in the last three months compared with 14.8% decline of the industry.

Will the price performance improve post Q1 earnings? Before having a look at what our quantitative model predicts, let’s check the factors that are likely to impact the quarter’s results.

Factors to Influence Q1 Results

Per the monthly metrics data published by Invesco, its preliminary assets under management (AUM) of $934.2 billion as of Mar 31, 2018, were marginally down from $937.6 billion as of Dec 31, 2017. The fall in AUM was mainly due to unfavorable market returns and net long-term outflows. Given the decline in AUM in the quarter, the related fee is also not expected to witness improvement.

In fact, management expects performance fees for the first quarter to be around $10-$15 million, down from $43 million reported in the prior quarter. Adjusted other revenues are expected to be $16-$17 million.

On the cost front, management anticipates compensation expenses to increase sequentially to nearly $410-$415 million in the to-be-reported quarter. The quarter’s results are expected to include the seasonality of payroll taxes, one-month impact from the base salary increases and the impact of higher foreign exchange.

The company expects market expenses to be nearly $32 million in the first quarter. Further, property, office and technology costs are expected to be $102-$104 million, stable sequentially.

The company expects G&A expenses to be $80-$83 million in first-quarter 2018.

Earnings Whispers

According to our quantitative model, the chances of Invesco beating the Zacks Consensus Estimate in the first 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.

Zacks ESP: The Earnings ESP for Invesco is 0.00%.

Zacks Rank: Invesco has a Zacks Rank #4 (Sell), which further decreases the predictive power of ESP.

Stocks to Consider

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

SVB Financial Group SIVB is slated to release results on Apr 26. It has an Earnings ESP of +1.38% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cullen/Frost Bankers, Inc. CFR is also slated to report results on Apr 26. It has an Earnings ESP of +0.31% and carries a Zacks Rank #3.

Eaton Vance Corp. EV has an Earnings ESP of +0.84% and a Zacks Rank #3. It is expected to report results on May 23.

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Cullen/Frost Bankers, Inc. (CFR) : Free Stock Analysis Report
 
SVB Financial Group (SIVB) : Free Stock Analysis Report
 
Invesco Ltd. (IVZ) : Free Stock Analysis Report
 
Eaton Vance Corporation (EV) : Free Stock Analysis Report
 
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