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Rise in AUM Balance to Support Invesco's (IVZ) Q4 Earnings

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Invesco (IVZ - Free Report) is slated to announce fourth-quarter and full-year 2021 results on Jan 25, before market open. While its earnings are expected to have witnessed a rise in the to-be-reported quarter, revenues are projected to have declined on a year-over-year basis.

In the last reported quarter, the company’s adjusted earnings outpaced the Zacks Consensus Estimate. Results reflected an improvement in revenues and solid growth in assets under management (AUM) balance.

Invesco has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the beat being 12.84%, on average.

Invesco Ltd. Price and EPS Surprise

Invesco Ltd. Price and EPS Surprise

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

The Zacks Consensus Estimate for Invesco’s fourth-quarter earnings is pegged at 76 cents, which has moved 1.3% upward over the past seven days. The figure indicates growth of 5.6% from the year-ago quarter’s reported number.

The consensus estimate for sales is pegged at $1.35 billion, suggesting a year-over-year decline of 16.9%.

Factors at Play

Per the monthly metrics data published by Invesco, preliminary total AUM as of Dec 31, 2021, was $1,610.9 billion, up 5.4% from the Sep 30, 2021 level. The rise was mainly driven by net inflows, while unfavorable market returns somewhat hurt.

Supported by growth in AUM balance, the company’s investment management fee is expected to have been positively impacted. The Zacks Consensus Estimate for the same is pegged at $1.47 billion, indicating an increase of 15.3% on a sequential basis.

The consensus estimate for service and distribution fees of $419 million indicates a 2.4% sequential improvement. The Zacks Consensus Estimate for other revenues is pegged at $65 million, implying a rise of 6.6%. Likewise, the consensus estimate for performance fees of $9.9 million indicates a substantial improvement from the prior quarter.

Management expects money market fee waivers to hurt top-line growth to some extent.

On the cost front, while Invesco’s cost-saving initiatives are likely to have boosted its efficiency, the steady rise in compensation and marketing costs is expected to have had an adverse impact on the overall expense level in the fourth quarter. Also, the company is expected to have incurred restructuring charges related to its cost-saving program.

Management expects total operating expenses to be relatively flat sequentially, assuming no change in markets and foreign exchange levels as of Sep 30, 2021. However, a modest rise in marketing-related expenses is expected as spending generally increases seasonally.

What Our Model Predicts

Our proven model does not conclusively predict an earnings beat for Invesco this time around. 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.

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 0.00%.

Zacks Rank: The company currently carries a Zacks Rank #3.

Finance Stocks That Warrant a Look

A few finance stocks, which you may want to consider as these have the right combination of elements to post an earnings beat in their upcoming releases per our model, are Prosperity Bancshares (PB - Free Report) , LendingClub Corporation (LC - Free Report) and Ares Capital Corporation (ARCC - Free Report) .

Prosperity Bancshares is slated to report quarterly earnings on Jan 26. PB, which carries a Zacks Rank of 3 at present, has an Earnings ESP of +0.55%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

LendingClub is also slated to report quarterly earnings on Jan 26. LC, which sports a Zacks Rank #1 at present, has an Earnings ESP of +7.81%.

Ares Capital is slated to report quarterly results on Feb 9. ARCC currently has an Earnings ESP of +11.11% and a Zacks Rank #2.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.