Net Outflows To Hurt AllianceBernstein's (AB) Q4 Earnings

AllianceBernstein Holding L.P. (NYSE:AB) is scheduled to announce fourth quarter and 2018 results on Feb 13, before the market opens. Its revenues and earnings for the to-be-reported quarter are projected to decline year over year.

In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate. Results were driven by significant rise in revenues and net inflows while an increase in adjusted operating expenses acted as a tailwind.

AllianceBernstein has an impressive earnings surprise history. Its surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 13.2%.

Nonetheless, activities of the company in the fourth quarter failed to encourage analysts. As a result, the consensus estimate for earnings of 64 cents has remained unchanged over the past 30 days. Further, the figure reflects year-over-year decline of 23.8%.

Factors at Play

Per the monthly metrics data published by AllianceBernstein, its preliminary assets under management (AUM) of $516 billion as of Dec 31, 2018, were down 6.3% from Sep 30, 2018. Significant volatility and corrections in equity markets resulted in substantial outflows during the fourth quarter. Thus, given the decline in total AUM, base and performance are expected to have decreased.

As base fees constitute a significant part of AllianceBernstein’s net revenues, fall in the same will have an adverse impact on the top line. Therefore, the consensus estimate for sales for the to-be-reported quarter is $700.5 million, which reflects a fall of 9% year over year.

On the cost front, expenses are expected to remain manageable. As AllianceBernstein’s financial performance is not expected to be impressive in the fourth quarter, employee compensation costs are likely to decline. Nonetheless, the company will likely record a rise in interest on borrowing, given the higher interest rates.

Earnings Whispers

Here’s what our quantitative model predicts:

The chances of AllianceBernstein beating the Zacks Consensus Estimate in the fourth quarter are low. This is because it does not have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — 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.

Earnings ESP: The Earnings ESP for AllianceBernstein is 0.00%.

Zacks Rank: AllianceBernstein currently has a Zacks Rank #4 (Sell), which further lowers the predictive power of ESP.

Stocks to Consider

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

Bank of Montreal (TO:BMO) is slated to release results on Feb 26. The company has an Earnings ESP of +0.30% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Bank of Nova Scotia (TO:BNS) is scheduled to release results on Feb 26. It has an Earnings ESP of +0.89% and carries a Zacks Rank #3.

Garrison Capital Inc. (NASDAQ:GARS) has an Earnings ESP of +11.94% and has a Zacks Rank #2 (Buy). It is scheduled to report results on Mar 5.

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