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Lower Transaction Fees to Hurt Houlihan Lokey's (HLI) Q3 Earnings
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Houlihan Lokey, Inc. (HLI - Free Report) is scheduled to release third-quarter fiscal 2024 results on Feb 1, 2024, after market close.
Q3 Estimates
The Zacks Consensus Estimate for Houlihan Lokey’s third-quarter fiscal 2024 earnings per share is pegged at $1.12, which indicates a 1.8% decline from the prior-year quarter’s reported figure.
The consensus mark for revenues is pegged at $484 million, suggesting 6.1% growth from the year-ago quarter’s reported number.
Earnings Surprise History
Houlihan Lokey’s bottom line beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 6.55%. This is depicted in the chart below:
In the fiscal third-quarter, the top line of Houlihan Lokey is likely to have benefited from improved fee revenues derived in return for offering enhanced advisory services on transactions that are contingent on individually negotiated engagement letters. The increased availability of credit across the mid-cap space is likely to have provided an impetus to HLI’s Capital Markets business.
Strong contribution from the Financial Restructuring segment is likely to have driven the overall revenues of Houlihan Lokey. The unit is expected to have gained from higher interest rates that are expected to have provided a favorable market condition for reinsurance transactions. This, in turn, is likely to have led to an uptick in the number of closed transactions in the to-be-reported quarter.
However, softer contributions from the Corporate Finance, and Financial and Valuation Advisory segments are expected to have dampened Houlihan Lokey’s top-line growth in the fiscal third-quarter. The results of the Corporate Finance unit are likely to have been strained due to a decline in average transaction fees. Nevertheless, strong new business growth is likely to have acted as a partial offset for the segment.
Revenues in the Financial and Valuation Advisory segment are likely to have been hurt by a decrease in the number of Fee Events. Nevertheless, a rebounding merger and acquisition market is expected to have provided some respite to the unit’s results in the to-be-reported quarter.
HLI’s margins are likely to have taken a hit from elevated operating expenses, which in turn, are expected to have stemmed from higher travel, meals and entertainment costs, rent expenses, professional fees, and information technology and communications costs.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict an earnings beat for Houlihan Lokey this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here, as you see below.
Earnings ESP: Houlihan Lokey has an Earnings ESP of -2.23% because the Most Accurate Estimate of $1.10 is pegged lower than the Zacks Consensus Estimate of $1.12. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Zacks Rank: HLI currently carries a Zacks Rank of 3.
Stocks to Consider
While an earnings beat looks uncertain for Houlihan Lokey, here are some companies from the Finance space, which according to our model, have the right combination of elements to beat on earnings this time around:
The Zacks Consensus Estimate for ARI’s fourth-quarter 2023 earnings is pegged at 36 cents per share, which indicates an improvement of 16.1% from the prior-year quarter’s reported figure.
The consensus mark for fourth-quarter earnings has been revised 5.9% upward over the past 30 days.
Hamilton Lane Incorporated (HLNE - Free Report) has an Earnings ESP of +12.50% and a Zacks Rank of 2, at present. The Zacks Consensus Estimate for HLNE’s fourth-quarter 2023 earnings is pegged at 88 cents per share, which more than doubled from the year-ago quarter’s reported figure.
The consensus mark for fourth-quarter earnings has been revised 8.6% upward over the past seven days.
Brookfield Asset Management Ltd. (BAM - Free Report) has an Earnings ESP of +0.69% and a Zacks Rank of 3, currently. The Zacks Consensus Estimate for BAM’s fourth-quarter 2023 earnings is pegged at 34 cents per share, which indicates an improvement of 9.7% from the prior-year quarter’s reported figure.
Brookfield’s earnings beat estimates in two of the trailing four quarters and missed the mark twice, the average surprise being 0.18%.
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Lower Transaction Fees to Hurt Houlihan Lokey's (HLI) Q3 Earnings
Houlihan Lokey, Inc. (HLI - Free Report) is scheduled to release third-quarter fiscal 2024 results on Feb 1, 2024, after market close.
Q3 Estimates
The Zacks Consensus Estimate for Houlihan Lokey’s third-quarter fiscal 2024 earnings per share is pegged at $1.12, which indicates a 1.8% decline from the prior-year quarter’s reported figure.
The consensus mark for revenues is pegged at $484 million, suggesting 6.1% growth from the year-ago quarter’s reported number.
Earnings Surprise History
Houlihan Lokey’s bottom line beat estimates in three of the trailing four quarters and missed the mark once, the average surprise being 6.55%. This is depicted in the chart below:
Houlihan Lokey, Inc. Price and EPS Surprise
Houlihan Lokey, Inc. price-eps-surprise | Houlihan Lokey, Inc. Quote
Factors at Play
In the fiscal third-quarter, the top line of Houlihan Lokey is likely to have benefited from improved fee revenues derived in return for offering enhanced advisory services on transactions that are contingent on individually negotiated engagement letters. The increased availability of credit across the mid-cap space is likely to have provided an impetus to HLI’s Capital Markets business.
Strong contribution from the Financial Restructuring segment is likely to have driven the overall revenues of Houlihan Lokey. The unit is expected to have gained from higher interest rates that are expected to have provided a favorable market condition for reinsurance transactions. This, in turn, is likely to have led to an uptick in the number of closed transactions in the to-be-reported quarter.
However, softer contributions from the Corporate Finance, and Financial and Valuation Advisory segments are expected to have dampened Houlihan Lokey’s top-line growth in the fiscal third-quarter. The results of the Corporate Finance unit are likely to have been strained due to a decline in average transaction fees. Nevertheless, strong new business growth is likely to have acted as a partial offset for the segment.
Revenues in the Financial and Valuation Advisory segment are likely to have been hurt by a decrease in the number of Fee Events. Nevertheless, a rebounding merger and acquisition market is expected to have provided some respite to the unit’s results in the to-be-reported quarter.
HLI’s margins are likely to have taken a hit from elevated operating expenses, which in turn, are expected to have stemmed from higher travel, meals and entertainment costs, rent expenses, professional fees, and information technology and communications costs.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict an earnings beat for Houlihan Lokey this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, that’s not the case here, as you see below.
Earnings ESP: Houlihan Lokey has an Earnings ESP of -2.23% because the Most Accurate Estimate of $1.10 is pegged lower than the Zacks Consensus Estimate of $1.12. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Zacks Rank: HLI currently carries a Zacks Rank of 3.
Stocks to Consider
While an earnings beat looks uncertain for Houlihan Lokey, here are some companies from the Finance space, which according to our model, have the right combination of elements to beat on earnings this time around:
Apollo Commercial Real Estate Finance, Inc. (ARI - Free Report) has an Earnings ESP of +0.93% and a Zacks Rank of 1, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ARI’s fourth-quarter 2023 earnings is pegged at 36 cents per share, which indicates an improvement of 16.1% from the prior-year quarter’s reported figure.
The consensus mark for fourth-quarter earnings has been revised 5.9% upward over the past 30 days.
Hamilton Lane Incorporated (HLNE - Free Report) has an Earnings ESP of +12.50% and a Zacks Rank of 2, at present. The Zacks Consensus Estimate for HLNE’s fourth-quarter 2023 earnings is pegged at 88 cents per share, which more than doubled from the year-ago quarter’s reported figure.
The consensus mark for fourth-quarter earnings has been revised 8.6% upward over the past seven days.
Brookfield Asset Management Ltd. (BAM - Free Report) has an Earnings ESP of +0.69% and a Zacks Rank of 3, currently. The Zacks Consensus Estimate for BAM’s fourth-quarter 2023 earnings is pegged at 34 cents per share, which indicates an improvement of 9.7% from the prior-year quarter’s reported figure.
Brookfield’s earnings beat estimates in two of the trailing four quarters and missed the mark twice, the average surprise being 0.18%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.