What's In The Cards For Eaton Vance (EV) In Q2 Earnings?

Eaton Vance Corp. (NYSE:EV) is scheduled to announce second-quarter fiscal 2018 (ended Apr 30) results on May 22, before the opening bell. Its quarterly revenues and earnings are expected to improve year over year.

The company is expected to benefit from increase in revenues supported by its strategic initiatives and a rise in assets under management (AUM). However, higher expenses will likely offset the positives to some extent. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is 78 cents, up 25.8% year over year.

In the last reported quarter, Eaton Vance’s adjusted earnings outpaced the Zacks Consensus Estimate. Results were primarily driven by higher revenues.

Also, Eaton Vance does not boast an impressive earning surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters. Its average earnings surprise was a negative 0.4%.

Further, the company’s shares have lost 5.9% for the three months ended Apr 30, 2018, compared with the industry’s fall of 12.6%.

Factors to Impact Q2 Results

On the revenue front, Eaton Vance is likely to gain from the continued improvement in the global equity markets. Also, AUM is projected witness a modest rise. The Zacks Consensus Estimate for AUM in the to-be-reported quarter is expected to be $454 billion, up 1.1% sequentially.

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 improvement as outflows from higher fee strategies will likely decrease. The Zacks Consensus Estimate for revenues of $425.3 million shows 13.5% increase from the prior-year quarter.

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

Further, non-compensation costs are likely to rise due to higher distribution expenses and fund-related costs. So, overall expenses are expected to trend higher in the to-be-reported quarter.

Here is what the quantitative model predicts:

The chances of Eaton Vance beating the Zacks Consensus Estimate is less as it doesn’t have 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 -1.67%.

Zacks Rank: Eaton Vance has a Zacks Rank #3, which increases the predictive power of ESP. But we need to have positive ESP to be sure of earnings beat.

Stocks That Warrant a Look

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Also sporting Zacks Rank #1, Noah Holdings Limited’s (NYSE:NOAH) current-year earnings estimates were revised 23% upward, over the last 60 days. Further, over the past year, its shares have surged 135.9%.

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