Investment Managers' Earnings On Jul 28: BEN, VRTS & WETF

Investment management (part of the broader Finance sector) performed decently over the last several quarters. This time too, decent results are anticipated on positive markets, favorable currencies and better-than-expected flows.

The S&P 500 Index recorded a total return of 3.1% in the second quarter. Though the U.S. equity market recorded positive returns amid mixed economic data, it underperformed both non-U.S. developed and emerging markets. Hence, asset managers with global presence are anticipated to record a rise in equity asset under management (AUM). Moreover, weakness of the U.S. dollar drove the global diversified AUM mix.

Further, rising interest rates are expected to lead to decline in fee waivers. Also, demand for alternative investment sources might have aided revenue growth for the investment managers. However, rise in operating expenses, driven by marketing and investments might hurt the bottom line.

Conversely, during the quarter, fixed income generated positive returns as investors ran for safe haven assets. Consequently, fixed income prices increased and resulted in reduced yields.

Notably, some investment managers, including The Blackstone Group L.P. (NYSE:BX) , T. Rowe Price Group, Inc. (NASDAQ:TROW) , Ameriprise Financial Inc.’s (NYSE:AMP) and BlackRock, Inc. (NYSE:BLK) , have already released results. Out of these, Blackstone Group and BlackRock missed estimates despite recording AUM growth, while T. Rowe Price and Ameriprise beat estimates.

Notably, per our Earnings Preview, overall earnings for the Investment managers in second-quarter 2017 are likely to be up 7.7%.

Our quantitative model offers some insights into stocks that are about to report earnings. Per the model, in order to be confident of an earnings beat, a stock needs to have the right combination of the two key ingredients – a positive Earnings ESPand 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.

Let’s take a look at the investment management stocks that are scheduled to release quarterly numbers on Jul 28.

Franklin Resources, Inc. (NYSE:BEN) is scheduled to report fiscal third-quarter 2017 (ended Jun 30) results before the opening bell. Given Franklin’s AUM disclosure for Jun 2017, the upcoming release will display higher assets under management on a year-over-year basis. Franklin’s cost-control efforts should support bottom-line growth to some extent. Notably, management expects expenses in fiscal 2017 to remain flat or decline slightly, considering the impact of previous cost-cutting initiatives.

In addition, we believe that the company’s top line will likely get support from its diversified portfolio offerings, as well as global presence (read more: Franklin to Post Q3 Earnings: A Surprise in the Cards?).

Moreover, our proven quantitative model predicts a likely earnings beat. The company has a Zacks Rank #3 with an Earnings ESP of +1.37%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Notably, Franklin recorded positive earnings surprise in each of its trailing four quarters, with an average surprise of 14.80% as depicted in the chart below:

Franklin Resources, Inc. Price and EPS Surprise

Franklin Resources, Inc. Price and EPS Surprise | Franklin Resources, Inc. QuoteVirtus Investment Partners, Inc. (NASDAQ:VRTS) is set to announce results before the market opens. The Zacks Consensus Estimate of $1.66 for the company for the upcoming release indicates year-over-year growth of about 33.6%.

Further, Virtus Investment Partners’ activities during the quarter were enough to win analysts’ confidence, as is evident from two positive revisions in earnings estimates (versus one negative revision) over the last 30 days. Notably, the Zacks Consensus Estimate increased 5.7% over the same time frame.

Additionally, our proven quantitative model does not conclusively predict a likely earnings beat. The company has a Zacks Rank #3 with an Earnings ESP of 0.00%.

Virtus Investment Partners recorded positive earnings surprise in one of the trailing four quarters as shown in the chart below:

Virtus Investment Partners, Inc. Price and EPS Surprise

Virtus Investment Partners, Inc. Price and EPS Surprise | Virtus Investment Partners, Inc. QuoteWisdomTree Investments, Inc. (NASDAQ:WETF) is slated to release results, before the market opens. WisdomTree remains focused on executing strategic growth initiatives, including expansion of distribution capabilities, investment in technology, and launch of innovative products and addition of personnel. We expect such initiatives to escalate the company’s marketing and sales expenses in the second quarter.

Further, outflows related to internationally hedged products, particularly the company’s major currency-hedged funds – HEDJ and DXJ – which constitute major part of the company’s AUM are expected to continue. (read more: Why WisdomTree Might Disappoint in Q2 Earnings).

With respect to the surprise trend, WisdomTree Investments posted positive surprise in one of the last four quarters as shown in the chart below:

WisdomTree Investments, Inc. Price and EPS Surprise

WisdomTree Investments, Inc. Price and EPS Surprise | WisdomTree Investments, Inc. Quote

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