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5 Asset Management Stocks Set to Beat Q3 Earnings Estimates

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Investment managers that have reported third-quarter 2020 results so far witnessed rise in asset balances, driven by higher market values and the favorable impact of a weaker U.S. dollar. Also, support from management fees aided their earnings to an extent.

The performance of equity markets was favorable during the quarter, as reflected by nearly 8% growth of the S&P 500 Index. The pandemic, along with concerns surrounding its impact on the economy, weighed on investor sentiments during the third quarter and kept trading counters busy, resulting in volatile market performance. Thus, rise in asset prices might have led to net inflows.

Further, support from government’s stimulus package and the Federal Reserve’s efforts to support the economy are likely to have resulted in positive returns from fixed income assets class.

Also, FX was a favorable factor this quarter as U.S. dollar weakened leading to positive impact on the global diversified assets under management mix, which along with strong equity markets might have supported overall investment management fees.

On the cost front, with majority of employees working from home, asset managers are expected to have recorded a fall in overhead expenses in the third quarter. Yet, with the increase in the use of virtual mediums for communication and other business activities, technology costs are expected to have risen to some extent. Overall, costs are expected to have been manageable.

Q3 Earnings Expectations

The Zacks Finance sector’s (of which investment management is a part) earnings are projected to decline 8.2% year over year in the third quarter. This is compares favorably with 45.3% fall recorded in second-quarter 2020.

(For a detailed look at the earnings growth projections for this sector and others, please read our Earnings Preview.)

Picking Potential Winners

With the asset managers expected to have witnessed decent performance in the third quarter, we have selected some stocks that are well positioned to beat earnings estimates in their upcoming releases.

Choosing stocks with earnings beat potential might be a difficult task unless one knows the process to shortlist. One way to do it is by picking stocks that have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising in their upcoming earnings announcement. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

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

5 Investment Managers Set to Surpass Earnings Estimates

Here are five stocks that have the right combination of elements to deliver positive earnings surprises in their upcoming announcements:

The Blackstone Group Inc (BX - Free Report) is set to report third-quarter earnings on Oct 28. The company currently has an Earnings ESP of +1.43% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Earnings ESP for Ares Management Corporation (ARES - Free Report) is +1.42% and it has a Zacks Rank of 2 at present. The company is set to report quarterly numbers on Oct 28.

Apollo Global Management, Inc. (APO - Free Report) has an Earnings ESP of +2.04% and a Zacks Rank of 3. It is slated to report results on Oct 29.

Janus Henderson Group plc (JHG - Free Report) is set to report third-quarter earnings on Oct 29. The company currently has an Earnings ESP of +1.81% and a Zacks Rank of 1.

The Earnings ESP for Hamilton Lane Inc. (HLNE - Free Report) is +3.77% and it sports a Zacks Rank of 1 at present. The company is scheduled to release quarterly figures on Nov 4.

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