Tough Backdrop To Hurt Affiliated Managers (AMG) Q4 Earnings

Affiliated Managers Group Inc. (NYSE:AMG) is slated to report fourth quarter and 2018 results on Feb 4, before the opening bell. Its quarterly earnings and revenues are projected to decline year over year.

In the last reported quarter, the company’s economic earnings outpaced the Zacks Consensus Estimate. Results were driven by higher revenues and assets under management (AUM) growth while higher operating expenses were the undermining factor.

Moreover, the company boasts an impressive earnings surprise history. Its earnings surpassed the consensus estimate in each of the trailing four quarters, the average beat being 1.4%.

Factors to Impact Q4 Results

Affiliated Managers holds an almost unbeaten track record of buying equity interests in asset management companies with strong performance-oriented products. The past equity investments are expected to support the company’s top line.

Nonetheless, a tough operating environment during the fourth quarter owing to market decline and extreme volatility will hurt the company’s financial performance to a great extent.

Management expects the ratio of adjusted earnings before interest, taxes, depreciation and amortization to average AUM to be nearly 12.4 basis points for the to-be-reported quarter. Further, other economic items are projected to be around $1 million.

On the cost front, management projects total interest expenses of around $19 million in the fourth quarter, relatively stable sequentially.

Also, the company’s share of amortization and impairments are expected to be $42 million, up from $30.1 million recorded in the prior quarter.

The company expected to repurchase nearly $100 million worth of shares in the fourth quarter.

Earnings Whispers

Now, let’s check what our quantitative model predicts.

We cannot conclusively predict whether Affiliated Managers will be able to beat the Zacks Consensus Estimate this time. 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 Affiliated Managers is 0.00%.

Zacks Rank: Affiliated Managers currently has a Zacks Rank #3, which increases the predictive power of ESP. But we need to have a positive Earnings ESP to be sure of the positive surprise.

The Zacks Consensus Estimate for earnings of $3.51 for the fourth quarter reflects 25% decline on a year-over-year basis. Further, the consensus estimate for sales is $555.9 million, indicating fall of 8%.

Stocks That Warrant a Look

Here are some 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.

Apollo Investment Corporation (NASDAQ:AINV) is slated to release results on Feb 6. The company has an Earnings ESP of +0.72% and carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ares Capital Corporation (NASDAQ:ARCC) is scheduled to release results on Feb 12. It has an Earnings ESP of +1.10% 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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