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Why Affiliated Managers (AMG) Q2 Earnings Might Disappoint

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Affiliated Managers Group Inc. (AMG - Free Report) is scheduled to report second-quarter 2017 results before the opening bell on Jul 31. Its earnings and revenues are projected to grow year over year.

Last quarter, the company’s earnings outpaced the Zacks Consensus Estimate. Assets under management (AUM) witnessed growth. However, marginally lower revenues along with elevated expenses were the headwinds.

Affiliated Managers boasts an impressive earning surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 1.6%.

The positive earnings surprises have supported a 23.1% year-to-date rally of the stock versus the 21.9% growth of the industry it belongs to.

Will the rally in stock price continue post Q2 earnings? It depends on the company’s ability to impress the market with an earnings beat and improved financials.

According to our proven model, chances of Affiliated Managers beating the Zacks Consensus Estimate this time around are low. This is because it does not have the right combination of 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 Affiliated Managers is -0.31%. This is because the Most Accurate estimate of $3.23 is below the Zacks Consensus Estimate of $3.24.

Zacks Rank: Affiliated Managers has a Zacks Rank #3, which increases the predictive power of ESP. However, a positive ESP is needed to be confident of an earnings beat.

Factors to Influence Q2 Results

Affiliated Managers holds an almost unbeaten track record of buying equity interests in asset management companies with strong performance-oriented products. The past equity investments should continue boosting the company’s top line, driven by the excellent long-term performance of its affiliates.

Management expects the ratio of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to average AUM in the range of 12.8–13.1 basis points (bps) for the quarter. Further, other economic items are projected to be around $1 million per quarter.

On the cost front, management projects total interest expenses of around $22 million in the second quarter, almost unchanged sequentially. Also, amortization expenses are projected to be $38 million, almost in line on a sequential basis.

However, activities of the company in the second quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate remained stable over the last seven days.

Stocks that Warrant a Look

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

Boston Properties, Inc. (BXP - Free Report) is scheduled to release results on Aug 1. It has an Earnings ESP of +0.62% and a Zacks Rank #3.

CME Group Inc. (CME - Free Report) has an Earnings ESP of +0.83% and a Zacks Rank #3. The company is also slated to release results on Aug 1.

TPG Specialty Lending, Inc. (TSLX - Free Report) is slated to release results on Aug 2. It has an Earnings ESP of +8.70% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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