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Ameriprise (AMP) to Report Q3 Earnings; What to Expect?

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Ameriprise Financial, Inc.AMP is scheduled to release third-quarter 2015 results on Oct 21, after the market closes.

Last quarter, earnings per share outpaced the Zacks Consensus Estimate. Results benefited from an improved top line. However, a rise in operating expenses and unfavorable impact from foreign exchange were the undermining factors.

Ameriprise recorded an earnings beat in three of the prior four quarters with an average positive surprise of 3.67%.

Is Ameriprise likely to miss on earnings this quarter? Let's see how things have shaped up for this announcement.

Factors Influencing Q3 Results

Ameriprise expects pre-tax operating earnings from the Advice & Wealth Management ("AWM") and the Asset Management segments to reach an intermediate 70% plus target, up from the current level of 65%, mainly driven by sturdy growth in the AWM segment. However, management expects modest sequential operating earnings growth in the quarter due to seasonal lower activity.

Further, management expects the margin level achieved in the AWM segment in the second quarter of 2015 to continue in the upcoming quarters. Moreover, it anticipates a less robust earnings potential from the fixed annuities division in the quarter, given the anticipated headwind of lower long-term interest rate.

However, it is optimistic about the Confident Retirement approach, which is expected to augur well for the AWM segment.

Further, management's expectations of improvement in productivity of the AWM segment as well as the recruiting pipeline will be reflected in the upcoming release. Also, the launch of a new product with The Blackstone Group L.P. is expected to add flows in the quarters ahead.

Ameriprise remains focused on online innovations and new product offerings, which helped enhance client confidence. We believe that management's target growth of 6%-8% in operating net revenues in the long term along with its impressive product innovations will be reflected in the upcoming results in the form of higher revenues.

Moreover, we observed that management and financial advice fees, which constitute a major source of revenue, exhibited growth in the recent quarters. Given a strong assets under management ("AUM") pipeline as well as rising demand for advisory services, the company should be able to sustain the increasing trend in this quarter as well.

Further, the company expects to maintain operating return on equity (ROE), excluding AOCI, in a range of 19%-23% in the quarters ahead. This indicates utilization of enterprise risk-management capabilities and product hedging by Ameriprise to predict and mitigate risk on the back of a robust balance sheet, which is expected to pay off in the upcoming quarter.

On the other hand, the asset management company has been witnessing a rising trend in expenses for several years. Management has been taking initiatives to improve expense management. Though advertising campaign and technology upgrades will be beneficial for Ameriprise in the long run, rising expenses will continue to hurt its profitability in the near term. Notably, management remains focused on keeping G&A expenses flat on a yearly basis.

Ameriprise's activities during the quarter failed to impress analysts. Hence, the Zacks Consensus Estimate for the quarter declined 1% to $2.37 per share over the last 7 days.

Earnings Whispers

Our proven model does not conclusively show that Ameriprise is likely to beat the Zacks Consensus Estimate in the third quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. Unfortunately, this is not the case here as you can see below.

Zacks ESP: The Earnings ESP for Ameriprise is -1.69%. This is because the Most Accurate estimate of $2.33 per share is below the Zacks Consensus Estimate of $2.37.

Zacks Rank: Ameriprise's Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise call.

Stocks That Warrant a Look

Here are a few finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter.

The Earnings ESP for The Chubb Corporation CB is +3.57% and it has a Zacks Rank #1. The company is slated to report on Oct 20.

Capital One Financial Corporation COF has an Earnings ESP of +2.08% and holds a Zacks Rank #3. It is scheduled to report on Oct 22.

Ally Financial Inc. ALLY has an earnings ESP of +1.92% and holds a Zacks Rank #2. It is scheduled to report results on Oct 29.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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