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Investment Managers' Earnings on Oct 25: TROW, PFG & BEN
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Investment management (part of the broader Finance sector) performed decently over the last several quarters with some quarterly volatility. This time too, decent results are expected on positive equity markets and rising rates with decent flows.
The S&P 500 Index recorded a total return of 7.2% in the third quarter. With the U.S. equity market recording positive returns amid improving economic data, it outperformed both non-U.S. developed and emerging markets. Hence, asset managers with more domestic exposure are anticipated to record rise in assets under management (AUM).
However, fixed income returns are expected to disappoint. Further, strengthening of the U.S. dollar might impact the global diversified AUM mix unfavorably.
Nevertheless, demand for alternative investment sources might have aided revenue growth for investment managers. However, rise in operating expenses, fueled by marketing and investments in technology, may impede bottom-line growth. Moreover, foreign exchange headwinds are likely to persist.
Notably, some investment managers, including The Blackstone Group L.P. (BX - Free Report) , Invesco (IVZ - Free Report) , Ameriprise Financial, Inc. (AMP - Free Report) and BlackRock, Inc. (BLK - Free Report) , have already released their results. Out of these, Blackstone Group, Ameriprise and BlackRock have surpassed estimates with AUM growth, while Invesco missed estimates, despite rise in AUM.
Notably, per our Earnings Preview, overall earnings for the finance sector in the quarter are expected to be up 35.4% year over year. This compares favorably with the prior-quarter growth of 21.5%.
Let’s take a look at the three major investment management stocks that are scheduled to release their results on Oct 25.
T. Rowe Price Group’s (TROW - Free Report) Zacks Consensus Estimate for third-quarter 2018 is pegged at $1.93 for the upcoming release, which indicates a 23.7% year-over-year growth.
Revenues of T. Rowe are expected to grow with support from several planned initiatives in connection with launching investment strategies and vehicles, enhancing client-engagement capabilities, strengthening distribution channel and improving technology platform. However, management expects these efforts to keep costs elevated this year. Nevertheless, higher AUM as indicated by the company’s monthly reports will lend support to top-line growth. (read more: Will Higher AUM Support T. Rowe Price's Q3 Earnings?)
Moreover, our proven quantitative model conclusively predicts a likely earnings beat. The company has a Zacks Rank #2 (Buy) with an Earnings ESPof +0.78%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
T. Rowe Price recorded positive earnings surprises in two of the trailing four quarters, with an average positive surprise of 2.6%, as shown in the chart below:
Principal Financial Group Inc. (PFG - Free Report) is scheduled to report its quarterly numbers, after the market closes. The company has a Zacks Rank #2, with an Earnings ESP of 0.00%. Principal Financial, which is likely to witness AUM growth in the to-be-reported quarter, has been benefiting from an extensive distribution foothold, operational discipline and strategic acquisitions. Furthermore, the company is likely to witness improvement in revenues aided by its fee-based revenues, improved segmental revenue growth, and an increase in investment income.
Meanwhile, Principal Financial has a negative average surprise of 3.1% for the trailing four quarters, having missed the Zacks Consensus Estimate in three of the four quarters as demonstrated in the chart below:
Principal Financial Group, Inc. Price and EPS Surprise
Franklin Resources (BEN - Free Report) is slated to release fourth-quarter fiscal 2018 results, before the market opens. While potential investments on the technology front may escalate expenses in fiscal 2018 (6.5-7.5%), previous cost-cutting initiatives are likely to infuse optimism. On the revenue front, investment management fees, which mark a significant portion of the company’s revenues, might reflect a dip in the fiscal fourth quarter.
Given Franklin’s AUM disclosure for September 2018 and unfavorable foreign currency fluctuations, its results are predicted to display lower AUM, on a sequential basis. In addition, the company is expected to record outflows mainly tied with U.S. and non-U.S. mutual funds. Nevertheless, decent equity markets performance can be a tailwind. (read more: Will High Equity Markets Drive Franklin’s Q4 Earnings?).
With respect to the surprise trend, Franklin posted positive surprises in three of the last four quarters, with an average beat of 6.72%, as shown in the chart below:
Irrespective of an earnings beat or miss, investors should focus on companies’ fundamentals to make investment decisions. Therefore, don’t forget to check our full write-up on earnings releases of these stocks later.
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Image: Bigstock
Investment Managers' Earnings on Oct 25: TROW, PFG & BEN
Investment management (part of the broader Finance sector) performed decently over the last several quarters with some quarterly volatility. This time too, decent results are expected on positive equity markets and rising rates with decent flows.
The S&P 500 Index recorded a total return of 7.2% in the third quarter. With the U.S. equity market recording positive returns amid improving economic data, it outperformed both non-U.S. developed and emerging markets. Hence, asset managers with more domestic exposure are anticipated to record rise in assets under management (AUM).
However, fixed income returns are expected to disappoint. Further, strengthening of the U.S. dollar might impact the global diversified AUM mix unfavorably.
Nevertheless, demand for alternative investment sources might have aided revenue growth for investment managers. However, rise in operating expenses, fueled by marketing and investments in technology, may impede bottom-line growth. Moreover, foreign exchange headwinds are likely to persist.
Notably, some investment managers, including The Blackstone Group L.P. (BX - Free Report) , Invesco (IVZ - Free Report) , Ameriprise Financial, Inc. (AMP - Free Report) and BlackRock, Inc. (BLK - Free Report) , have already released their results. Out of these, Blackstone Group, Ameriprise and BlackRock have surpassed estimates with AUM growth, while Invesco missed estimates, despite rise in AUM.
Notably, per our Earnings Preview, overall earnings for the finance sector in the quarter are expected to be up 35.4% year over year. This compares favorably with the prior-quarter growth of 21.5%.
Let’s take a look at the three major investment management stocks that are scheduled to release their results on Oct 25.
T. Rowe Price Group’s (TROW - Free Report) Zacks Consensus Estimate for third-quarter 2018 is pegged at $1.93 for the upcoming release, which indicates a 23.7% year-over-year growth.
Revenues of T. Rowe are expected to grow with support from several planned initiatives in connection with launching investment strategies and vehicles, enhancing client-engagement capabilities, strengthening distribution channel and improving technology platform. However, management expects these efforts to keep costs elevated this year.
Nevertheless, higher AUM as indicated by the company’s monthly reports will lend support to top-line growth. (read more: Will Higher AUM Support T. Rowe Price's Q3 Earnings?)
Moreover, our proven quantitative model conclusively predicts a likely earnings beat. The company has a Zacks Rank #2 (Buy) with an Earnings ESPof +0.78%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
T. Rowe Price recorded positive earnings surprises in two of the trailing four quarters, with an average positive surprise of 2.6%, as shown in the chart below:
T. Rowe Price Group, Inc. Price and EPS Surprise
T. Rowe Price Group, Inc. Price and EPS Surprise | T. Rowe Price Group, Inc. Quote
Principal Financial Group Inc. (PFG - Free Report) is scheduled to report its quarterly numbers, after the market closes. The company has a Zacks Rank #2, with an Earnings ESP of 0.00%. Principal Financial, which is likely to witness AUM growth in the to-be-reported quarter, has been benefiting from an extensive distribution foothold, operational discipline and strategic acquisitions. Furthermore, the company is likely to witness improvement in revenues aided by its fee-based revenues, improved segmental revenue growth, and an increase in investment income.
Nonetheless, escalating expenses might impact margin expansion (read more: Can Solid Segments Aid Principal Financial Q3 Earnings?).
Meanwhile, Principal Financial has a negative average surprise of 3.1% for the trailing four quarters, having missed the Zacks Consensus Estimate in three of the four quarters as demonstrated in the chart below:
Principal Financial Group, Inc. Price and EPS Surprise
Principal Financial Group, Inc. Price and EPS Surprise | Principal Financial Group, Inc. Quote
Franklin Resources (BEN - Free Report) is slated to release fourth-quarter fiscal 2018 results, before the market opens. While potential investments on the technology front may escalate expenses in fiscal 2018 (6.5-7.5%), previous cost-cutting initiatives are likely to infuse optimism. On the revenue front, investment management fees, which mark a significant portion of the company’s revenues, might reflect a dip in the fiscal fourth quarter.
Given Franklin’s AUM disclosure for September 2018 and unfavorable foreign currency fluctuations, its results are predicted to display lower AUM, on a sequential basis. In addition, the company is expected to record outflows mainly tied with U.S. and non-U.S. mutual funds. Nevertheless, decent equity markets performance can be a tailwind. (read more: Will High Equity Markets Drive Franklin’s Q4 Earnings?).
With respect to the surprise trend, Franklin posted positive surprises in three of the last four quarters, with an average beat of 6.72%, as shown in the chart below:
Franklin Resources, Inc. Price and EPS Surprise
Franklin Resources, Inc. Price and EPS Surprise | Franklin Resources, Inc. Quote
Irrespective of an earnings beat or miss, investors should focus on companies’ fundamentals to make investment decisions. Therefore, don’t forget to check our full write-up on earnings releases of these stocks later.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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