Ameriprise (AMP) To Report Q3 Earnings: What's In Store?

Ameriprise Financial, Inc. (NYSE:AMP) is scheduled to report third-quarter 2016 results after the market closes on Tuesday, Oct 25.

Last quarter, Ameriprise’s earnings lagged the Zacks Consensus Estimate, adversely impacted by lower revenues. However, a decline in operating expenses and increase in assets under management and assets under administration were on the positive side.

Nonetheless, the earnings miss was followed by a rise of nearly 11% in the company’s share price during the three months ended Sep 30, 2016. Notably, the Zacks Consensus Estimate has remained stable for the last seven days.

Furthermore, Ameriprise has a decent earnings surprise history, as evident from the chart below:

Earnings Whispers

Our proven model indicates that Ameriprise is likely to beat the earnings estimates this time. Note that a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) to have a significantly higher chance of beating earnings. This is the case here, as elaborated below.

Zacks ESP: The Earnings ESP for Ameriprise is +2.09%. This is because the Most Accurate estimate of $2.44 is higher than the Zacks Consensus Estimate of $2.39.

Zacks Rank: Ameriprise carries a Zacks Rank #3, which increases the predictive power of ESP. This, along with a positive ESP, increases the chances of a beat in the upcoming release.

So, will Ameriprise be able to reverse the trend this earnings season or will it succumb to industry-wide challenges? Let’s check how things have shaped up prior to the earnings release.

Factors to Impact Q3 Results

Ameriprise is expected to have witnessed better profitability during the quarter, due to the company’s persistent initiatives to improve its business. Further, we expect Advice & Wealth Management segment’s (AWM) performance to drive the company’s results. The AWM segment had delivered a growth in assets in the previous quarter. Based on expectations of improved advisor productivity, the same is expected to continue in the to-be-reported quarter.

Also, margin expansion in anticipated to have taken place in the AWM and Asset Management segments during the quarter.

However, due to the persistent low interest rate environment, new sales are anticipated to have been limited during the quarter. As a result, Annuities’ fixed income book is expected to gradually run off. This, in turn, will lead to a marginal decline in earnings.

Notably, the institutional funding which was anticipated in the second quarter of 2016, but was delayed due to Brexit, would result in $2.6 billion worth of institutional net outflows in the third quarter, including approximately $2 billion of very low fee, short-duration fixed-income mandates. Moreover, costs associated with advertising and technology upgrades are anticipated to ramp up the company’s expenses.

Also, owing the new DOL regulation, operating expenses are likely to slightly trend up during the quarter. Hence, on the whole, total operating expenses should move up in the third quarter.

Stocks That Warrant a Look

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

Raymond James Financial, Inc. (NYSE:RJF) is slated to release its results on Oct 26. The company has an Earnings ESP of +2.04% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks Rank #1 stocks here.

State Street Corporation (NYSE:STT) is scheduled to report results on Oct 26. The company has an Earnings ESP of +0.80% and carries a Zacks Rank #2.

Lazard Ltd. (NYSE:LAZ) is scheduled to report its results on Oct 27. It has an Earnings ESP of +3.90% and carries a Zacks Rank #2.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>