Finance Stocks' Q3 Earnings Slated On Nov 2: ARCC, ACAS, NSM

The Q3 earnings season is in full swing and the investors are keeping a tab on the companies’ performances. Several companies have come up with better-than-expected third-quarter 2016 results, despite a challenging operating environment.

Per the latest Earnings Preview report nearly 79% of the S&P 500 companies in the Finance sector have reported results for third-quarter 2016 so far. Total earnings for these companies increased 9.3% year over year on a revenue improvement of 5.9%. Notably, 74.6% companies have surpassed bottom-line expectations and 73.2% beat on the top line.

Performance of the companies so far reflects a significant improvement over the prior quarter. The report further states overall earnings for the S&P 500 stocks in the Finance sector are expected to be up 12.3% year over year in the third quarter. This compares favorably with a 5.2% decline in earnings in the last quarter.

Recovery in oil prices and improving domestic economic factors has strengthened the industry backdrop for the finance sector. Also, an improving labor market with lower unemployment rate and a recovering housing market supported growth in the industry. Nevertheless, global concerns and a persistent low-rate environment adversely affected the performance of the finance sector during the quarter.

Let’s have a look at how our model offers insights into the expected performance of the companies.

Our quantitative model offers some insights into stocks that are about to report their earnings. Per the model, in order to be confident of an earnings beat, a stock needs to have the right combination of the two key ingredients, a positive Earnings ESP and a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold).

Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising with their upcoming earnings announcement. It shows the percentage of difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Today, we are bringing three finance sector stocks that are expected to announce their third-quarter results on Nov 2.

The Zacks Consensus Estimate of 38 cents for Ares Capital Corporation (NASDAQ:ARCC) has remained steady over the past 30 days, while reflecting a year-over-year decline of 6.5%. However, the stock has chances of beating the Zacks Consensus Estimate as it has an Earnings ESP of +2.63%, with a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Further, Ares Capital has posted positive earnings surprises in three of the trailing four quarters.

American Capital, Ltd. (NASDAQ:ACAS) has a Zacks Consensus Estimate of 25 cents for the upcoming release. It reflects a year-over-year decline of about 10.7%. Also, it is difficult to conclusively predict an earnings beat this quarter as the company carries a Zacks Rank #3, with an Earnings ESP of 0.00%.

Notably, the company delivered average positive earnings surprise of 9.23% over the trailing four quarters as depicted in the chart below.

Nationstar Mortgage Holdings Inc. (NYSE:NSM) has the Zacks Consensus Estimate of 42 cents. This reflects year-over-year growth of 38.9% for the third quarter. However, we cannot conclusively predict earnings beat for Nationstar Mortgage Holdings as it carries a Zacks Rank #2, with an Earnings ESP of 0.00%.

In addition, the company has posted a positive earnings surprise of nearly 10.2% in the trailing four quarters.

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