Will An Earnings Beat In Q1 Boost Eaton Vance (EV) Stock?

Eaton Vance Corp. (NYSE:EV) is scheduled to announce first-quarter fiscal 2018 (ended Jan 31) results tomorrow, 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 quarter’s earnings is 71 cents, up 34% year over year.

Last quarter, Eaton Vance’s adjusted earnings lagged the Zacks Consensus Estimate. Results were primarily hurt by a rise in expenses.

Also, 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. Thus, its average earnings surprise was a negative 3.5%.

Further, the company’s shares have rallied 14.5% for the three month-ended Jan 31, 2018, outperforming the industry’s growth of 11.8%. Will the stock’s price performance improve post fiscal first-quarter earnings release? Let’s see how things are shaping up.

Why a Likely Positive Surprise?

Our proven model indicates that chances of Eaton Vance beating 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 +2.24%.

Zacks Rank: Eaton Vance has a Zacks Rank #2 (Buy), which increases the predictive power of ESP.

Factors to Influence Q1 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 an improvement during the quarter. The Zacks Consensus Estimate for AUM in the to-be-reported quarter is expected to be $443 billion, up 5% 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 $417 million shows 17.9% 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 in the United States might result in higher marketing expenses.

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

Other Stocks That Warrant a Look

Some other stocks in the same space worth considering are Ameriprise Financial, Inc. (NYSE:AMP) , Affiliated Managers Group, Inc. (NYSE:AMG) and BlackRock, Inc. (NYSE:BLK) . All the stocks hold a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ameriprise’s earnings estimates were revised 9.6% upward for 2018, in the past 60 days. Also, its share price has increased 16.3% over the past six months.

Affiliated Managers’ current-year earnings estimates were revised 6.3% upward, over the last 60 days. Further, over the past six months, its shares have rallied 9.2%.

BlackRock witnessed 12.1% upward earnings estimates revision for the current year, in the past 60 days. Moreover, over the past six months, its shares have surged 32.7%.

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