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3 Asset Management Stocks Set to Pull Off Earnings Beat in Q4
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One of the largest and most well-known asset management stocks — BlackRock (BLK - Free Report) — kicked off fourth-quarter earnings on Jan 12. In a challenging operating environment, BLK handily surpassed the Zacks Consensus Estimate. Higher revenues and assets under management (AUM) balance more than offset a rise in total expenses. In an effort to capitalize on an accelerating demand for infrastructure investment, it announced an agreement to acquire Global Infrastructure Partners for $3 billion in cash and around 12 million shares of BlackRock common stock.
In the fourth quarter of 2023, the industry players continued to face a challenging operating backdrop, though, in the later part of the quarter, some clarity on the Federal Reserve’s interest rate path offered support. We are using our proprietary methodology to find stocks that are poised to outpace the Zacks Consensus Estimate in the fourth quarter. By using the Zacks Stock Screener, we have identified three such asset management stocks — SEI Investments Company (SEIC - Free Report) , T. Rowe Price Group, Inc. (TROW - Free Report) and Principal Financial Group, Inc. (PFG - Free Report) .
These stocks have the ideal combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to surpass expectations. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Our proprietary methodology, Earnings ESP, shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Research shows that for stocks with this combination of rank and ESP, chances of a positive earnings surprise are as high as 70%.
Before we go into the details regarding the abovementioned asset managers, let’s first understand the factors that are likely to have influenced quarterly performance.
The performance of equity markets during the fourth quarter was robust. The S&P 500 Index gained 11.2% in the quarter, driven by the central bank’s signal of no further hike in rates this cycle, three interest rate cuts in 2024 and fading near-term recession risks. Thus, the market value of assets witnessed a rise, supporting performance fees.
Further, as the U.S. dollar lost some value, FX favorably impacted the asset managers’ performance. All these supported the asset price and also resulted in net inflows.
On the cost front, as asset managers continue to optimize operations through digital initiatives, expenses are likely to have been manageable. However, fears of an economic slowdown are likely to have driven cost-cutting measures among many industry players, which might have led to one-time restructuring expenses.
Q4 Earnings Expectations
The Zacks Finance sector’s (of which asset management is part) earnings are projected to rise 9.9% year over year in the fourth quarter. This compares with the 9.7% increase recorded in the third quarter of 2023.
(For a detailed look at the earnings growth projections for this sector and others, please read our Earnings Preview.)
3 Potential Safe Bets
SEI Investments, based in Oaks, PA, is a leading provider of wealth management business solutions in the financial services industry. The company offers investment processing, management and operations solutions globally.
Similar to other industry players, SEIC is likely to have benefited from solid equity market performance in the to-be-reported quarter. This is likely to have aided the company’s inflows and AUM balance.
SEI Investments is scheduled to announce results on Jan 31 after market close. The Zacks Consensus Estimate for its fourth-quarter earnings of 91 cents per share implies a rise of 9.6% from the year-ago reported figure. SEIC has an Earnings ESP of +0.64% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
T. Rowe Price, based in Baltimore, is a global investment management organization that provides a broad array of mutual funds, sub-advisory services and separate account management for individual and institutional investors, retirement plans and financial intermediaries.
TROW continues to focus on fortifying its business by enhancing investment capabilities, broadening distribution reach and investing in new product offerings, which will support revenue growth. The company reported a Dec 31, 2023 preliminary AUM balance of $1.45 trillion. Though it has improved on a year-over-year basis, the company recorded preliminary net outflows of $28.3 billion during the fourth quarter. Thus, this is likely to have marred the company’s performance fee to some extent.
T. Rowe Price is slated to announce results on Feb 8 before market open. The Zacks Consensus Estimate for the company’s fourth-quarter earnings is pegged at $1.60, implying a fall of 8.1% year over year. TROW has an Earnings ESP of +1.33% and a Zacks Rank #3.
Des Moines, Iowa-based Principal Financial is a leader in global investment management, offering a wide range of financial products and services, including retirement, asset management and insurance through its diverse family of financial services companies.
PFG’s operations capitalize on the extensive distribution footprint, best-in-class solutions, strategic buyouts and operational discipline. As the uncertainty over the macroeconomic backdrop was over, the performance of equity markets improved in the fourth quarter of 2023. Thus, like other industry players, the company is likely to have witnessed improvement in the inflow and a rise in the AUM balance.
Principal Financial is scheduled to announce fourth-quarter and full-year 2023 numbers on Feb 12 after the closing bell. The Zacks Consensus Estimate for fourth-quarter earnings of $1.70 indicates no change from the prior-year quarter. PFG has an Earnings ESP of +2.00% and a Zacks Rank #3.
Principal Financial Group, Inc. Price and EPS Surprise
Image: Bigstock
3 Asset Management Stocks Set to Pull Off Earnings Beat in Q4
One of the largest and most well-known asset management stocks — BlackRock (BLK - Free Report) — kicked off fourth-quarter earnings on Jan 12. In a challenging operating environment, BLK handily surpassed the Zacks Consensus Estimate. Higher revenues and assets under management (AUM) balance more than offset a rise in total expenses. In an effort to capitalize on an accelerating demand for infrastructure investment, it announced an agreement to acquire Global Infrastructure Partners for $3 billion in cash and around 12 million shares of BlackRock common stock.
In the fourth quarter of 2023, the industry players continued to face a challenging operating backdrop, though, in the later part of the quarter, some clarity on the Federal Reserve’s interest rate path offered support. We are using our proprietary methodology to find stocks that are poised to outpace the Zacks Consensus Estimate in the fourth quarter. By using the Zacks Stock Screener, we have identified three such asset management stocks — SEI Investments Company (SEIC - Free Report) , T. Rowe Price Group, Inc. (TROW - Free Report) and Principal Financial Group, Inc. (PFG - Free Report) .
These stocks have the ideal combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to surpass expectations. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Our proprietary methodology, Earnings ESP, shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Research shows that for stocks with this combination of rank and ESP, chances of a positive earnings surprise are as high as 70%.
Before we go into the details regarding the abovementioned asset managers, let’s first understand the factors that are likely to have influenced quarterly performance.
The performance of equity markets during the fourth quarter was robust. The S&P 500 Index gained 11.2% in the quarter, driven by the central bank’s signal of no further hike in rates this cycle, three interest rate cuts in 2024 and fading near-term recession risks. Thus, the market value of assets witnessed a rise, supporting performance fees.
Further, as the U.S. dollar lost some value, FX favorably impacted the asset managers’ performance. All these supported the asset price and also resulted in net inflows.
On the cost front, as asset managers continue to optimize operations through digital initiatives, expenses are likely to have been manageable. However, fears of an economic slowdown are likely to have driven cost-cutting measures among many industry players, which might have led to one-time restructuring expenses.
Q4 Earnings Expectations
The Zacks Finance sector’s (of which asset management is part) earnings are projected to rise 9.9% year over year in the fourth quarter. This compares with the 9.7% increase recorded in the third quarter of 2023.
(For a detailed look at the earnings growth projections for this sector and others, please read our Earnings Preview.)
3 Potential Safe Bets
SEI Investments, based in Oaks, PA, is a leading provider of wealth management business solutions in the financial services industry. The company offers investment processing, management and operations solutions globally.
Similar to other industry players, SEIC is likely to have benefited from solid equity market performance in the to-be-reported quarter. This is likely to have aided the company’s inflows and AUM balance.
SEI Investments is scheduled to announce results on Jan 31 after market close. The Zacks Consensus Estimate for its fourth-quarter earnings of 91 cents per share implies a rise of 9.6% from the year-ago reported figure. SEIC has an Earnings ESP of +0.64% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SEI Investments Company Price and EPS Surprise
SEI Investments Company price-eps-surprise | SEI Investments Company Quote
T. Rowe Price, based in Baltimore, is a global investment management organization that provides a broad array of mutual funds, sub-advisory services and separate account management for individual and institutional investors, retirement plans and financial intermediaries.
TROW continues to focus on fortifying its business by enhancing investment capabilities, broadening distribution reach and investing in new product offerings, which will support revenue growth. The company reported a Dec 31, 2023 preliminary AUM balance of $1.45 trillion. Though it has improved on a year-over-year basis, the company recorded preliminary net outflows of $28.3 billion during the fourth quarter. Thus, this is likely to have marred the company’s performance fee to some extent.
T. Rowe Price is slated to announce results on Feb 8 before market open. The Zacks Consensus Estimate for the company’s fourth-quarter earnings is pegged at $1.60, implying a fall of 8.1% year over year. TROW has an Earnings ESP of +1.33% and a Zacks Rank #3.
T. Rowe Price Group, Inc. Price and EPS Surprise
T. Rowe Price Group, Inc. price-eps-surprise | T. Rowe Price Group, Inc. Quote
Des Moines, Iowa-based Principal Financial is a leader in global investment management, offering a wide range of financial products and services, including retirement, asset management and insurance through its diverse family of financial services companies.
PFG’s operations capitalize on the extensive distribution footprint, best-in-class solutions, strategic buyouts and operational discipline. As the uncertainty over the macroeconomic backdrop was over, the performance of equity markets improved in the fourth quarter of 2023. Thus, like other industry players, the company is likely to have witnessed improvement in the inflow and a rise in the AUM balance.
Principal Financial is scheduled to announce fourth-quarter and full-year 2023 numbers on Feb 12 after the closing bell. The Zacks Consensus Estimate for fourth-quarter earnings of $1.70 indicates no change from the prior-year quarter. PFG has an Earnings ESP of +2.00% and a Zacks Rank #3.
Principal Financial Group, Inc. Price and EPS Surprise
Principal Financial Group, Inc. price-eps-surprise | Principal Financial Group, Inc. Quote