Eaton Vance Corp.EV is scheduled to report fourth-quarter fiscal 2015 (ended Oct 31) results on Nov 24, before the market opens.
Last quarter, Eaton Vance's adjusted earnings lagged the Zacks Consensus Estimate. Results were adversely impacted by a decline in top line and higher operating expenses.
Will Eaton Vance disappoint yet again? Or will it surpass earnings estimates this time? Let's see how things have shaped up for this announcement.
Factors Impacting Q4 Results
On the revenue front, Eaton Vance continues to face a downward trend given the turmoil across the global equity markets. Additionally, we anticipate lower average effective fee rates to dent growth in investment advisory and administrative fees.
Further, we believe assets under management will decline during the quarter. Therefore, top line will remain strained.
Further, mounting operating expenses is a major concern for Eaton Vance. The company's NextShares initiative will likely push expenses up during the quarter. The company anticipates incurring $8 million of expenditure related to this initiative for fiscal 2015.
Specifically, management projects compensation expenses to trend upward, led by addition of staff to support NextShares initiative and building up of global equity team in London. Moreover, we expect non-compensation expenditure to rise owing to an increase in distribution expenses and fund-related costs. Hence, overall expenses should trend higher in the quarter.
Eaton Vance's activities during the quarter were inadequate to win analysts' confidence. Thus, the Zacks Consensus Estimate fell 1.7% to 59 cents per share over the last 7 days.
Our proven model does not conclusively show that Eaton Vance is likely to beat the Zacks Consensus Estimate in fiscal fourth quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least #2 (Buy) or #3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: The Earnings ESP for Eaton Vance is -1.70%. This is because the Most Accurate estimate of 58 cents stands below the Zacks Consensus Estimate of 59 cents.
Zacks Rank: Eaton Vance's Zacks Rank #4 (Sell) further lowers the chance of an earnings beat.
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