4 Asset Managers Ready To Beat Earnings Estimates

The investment management sector has been reaping solid returns over the past few quarters thanks to higher demand for customized investment strategies and products. It has, in fact, earned a safe-bet status among investors aiming for large profits.

Investment managers introduce technologically advanced products and market those (with high advertisement spends) to lure new assets and clients. Subsequently, their performance and brand name play a key role in gaining market share and enjoying organic growth.

Though strict regulations somewhat dampen the growth for this sector, assets under management (AUM) shot up over the last couple of quarters on surging demand for equity-based products with the gradual recovery of the economy.

Given the positive sentiment, it might be a good idea to bet on a handful of investment management stocks that are poised to beat earnings estimates this quarter. An earnings beat will add to investors’ confidence in these stocks, leading to rapid price appreciation.

How to Pick the Best?

Picking the best stocks from the investment management space could appear to be a difficult task. One way to narrow down the list of choices during this earnings season is by looking at stocks that have the combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) – and a positive Zacks Earnings ESP.

Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising with their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.

Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

For investors seeking to apply this strategy to their portfolio, we have chosen 4 investment management stocks that may stand out this earnings season:

Franklin Resources Inc. (BEN) is a Zacks Rank #2 stock with an earnings ESP of +1.16%. The Zacks Consensus Estimate for the fiscal fourth quarter is 86 cents per share. In the past 30 days, estimates (on average) have inched up by a penny.

Headquartered in San Mateo, California, Franklin provides investment advisory and related services to retail mutual funds, institutional and private accounts and other investment products. The mutual funds and other products are sold to the public under 7 brands, namely Franklin Templeton, Mutual Series, Bissett, Fiduciary Trust, Darby, Balanced Equity Management and K2.

The company has registered an average earnings surprise of 4.1% over the trailing 12 months.

-Franklin is scheduled to announce its fiscal fourth-quarter and full-year 2013 results before the opening bell on Oct 24.

Kohlberg Kravis Roberts & Co. L.P. (KKR) carries a Zacks Rank #3 and has an earnings ESP of +3.57%. The Zacks Consensus Estimate for the third quarter is 56 cents per share. Over the past 30 days, estimates (on average) have inched up by a penny. Further, the company registered an average earnings surprise of 13.1% over the trailing 12 months.

Based in New York, Kohlberg Kravis provides a range of asset management services. Also, the company operates private equity funds; invests in leveraged loans, high-yield bonds and less liquid credit products; and, on behalf of portfolio companies, arranges equity and debt financing and offers capital market advice.

-Kohlberg Kravis is scheduled to announce its third-quarter 2013 results before the opening bell on Oct 24.

Waddell & Reed Financial, Inc. (WDR) has a Zacks Rank #1 along with an earnings ESP of +1.39%. The Zacks Consensus Estimate for the third quarter is pegged at 72 cents per share. Analysts have been moving their quarterly and full-year estimates higher of late, suggesting a solid earnings momentum in the upcoming quarters.

Overland Park, Kan.-based Waddell & Reed is one of the nation’s oldest mutual fund asset managers. It offers investment management, investment product underwriting and distribution as well as shareholder services administration to mutual funds, institutional funds and separately managed accounts in various parts of the country.

Moreover, the company has registered an average earnings surprise of 5.1% over the trailing 12 months.

-Waddell & Reed is scheduled to announce its third-quarter 2013 results before the opening bell on Oct 29.

Invesco Ltd.’s (IVZ) Zacks Rank #2 and earnings ESP of +1.92% position it in this category. The Zacks Consensus Estimate for the third quarter is 52 cents per share. Over the past 30 days, estimates (on average) have inched up by a penny.

Headquartered in Atlanta, Georgia, Invesco operates as an independent investment manager and offers a broad range of investment products and services. The company sells its investment products under the brand names – AIM, AIM Trimark, Atlantic Trust, Invesco, Invesco Perpetual, PowerShares, and WL Ross & Co.

-Invesco will be announcing its third-quarter 2013 results before the opening bell on Oct 31.

Going Forward

Investment management stocks are expected to be on a roll in the coming quarters with the demand for personalized investment solutions on the rise. Moreover, the majority of these companies return the most of their earnings to shareholders in the form of dividends and share repurchases. For investors, that’s the icing on the cake.

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