Eaton Vance (EV) Likely To Beat Q3 Earnings: Stock To Gain?

Eaton Vance Corp. (NYSE:EV) is scheduled to announce third-quarter fiscal 2017 (ended Jul 31) results on Wednesday Aug 23, before the opening bell. Its revenues and earnings are expected to improve year over year.

Last quarter, Eaton Vance’s adjusted earnings beat the Zacks Consensus Estimate. Results were primarily aided by a rise in revenues, partly offset by higher expenses.

Nonetheless, Eaton Vance does not boast an impressive earning surprise history. The company’s earnings surpassed the Zacks Consensus Estimate only once in the trailing four quarters while reporting in-line results in another. Thus, the company has an average negative surprise of 2.6%.

Further, the company’s share price has increased 11.7% so far this year, underperforming the industry’s rise of 16.5%. Will the stock’s price performance improve post fiscal third-quarter earnings release? Let’s see how things are shaping up.

Why a Likely Positive Surprise?

Our proven model indicates that the chances of Eaton Vance to beat the Zacks Consensus Estimate is high as it has right combination of two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better.

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 Eaton Vance is +0.50%.

Zacks Rank: Eaton Vance has a Zacks Rank #3, which increases the predictive power of ESP.

The Zacks Consensus Estimate of 67 cents reflects year-over-year growth of 19.6%.

Factors at Play

On the revenue front, Eaton Vance is likely to gain from the continued improvement in the global equity markets. Also, assets under management (AUM) should witness an improvement during the quarter. As of Jun 30, 2017, the company reported a 2.1% rise in AUM from the Apr 30, 2017 level.

However, pressure on average effective fee rates is likely to hurt growth in investment advisory and administrative fees. Nonetheless, the top line is likely to witness a slight improvement in case outflows from higher fee strategies abate.

On the expense front, Eaton Vance’s NextShares initiative should lead a slight rise in costs during the quarter. Also, the company’s plan to launch new fund products in the U.S. should lead to higher marketing expenses.

Also, non-compensation costs are likely to rise due to higher distribution expenses and fund-related costs. Hence, overall expenses should trend higher in the quarter.

Other Stocks that Warrant a Look

Some other stocks in the financial space worth considering are Ameriprise Financial, Inc. (NYSE:AMP) , AllianceBernstein Holding L.P. (NYSE:AB) and SEI Investments Co. (NASDAQ:SEIC) . All the stocks hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ameriprise’s earnings estimates were revised 4% upward for 2017, in the past 30 days. Also, its share price has jumped 43.4% over the past year.

AllianceBernstein’s current-year earnings estimates were revised nearly 1% upward, over the last 30 days. Further in the past year, its shares have rallied 5.3%.

SEI Investments witnessed a marginal upward earnings estimates revision for the current year, in the past 30 days. Moreover in the past year, its shares have gained 21.7%.

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