Eaton Vance (EV) Q1 Earnings: What's in Store for the Stock?

Eaton Vance Corp.EV is scheduled to report first-quarter fiscal 2017 (ended Jan 31) results on Wednesday Feb 22, before the opening bell.

Last quarter, Eaton Vance's adjusted earnings lagged the Zacks Consensus Estimate. Results were primarily hurt by a rise in expenses, partly offset by higher revenues.

Despite this dismal performance, the company's shares jumped nearly 20% for the three months ended Jan 31, 2017. Trump induced rally for the overall financial sector was the primary reason for this surge.

Nonetheless, Eaton Vance doesn't have a decent earnings surprise history. This is evident from the chart below:

Eaton Vance Corporation Price and EPS Surprise

Eaton Vance Corporation Price and EPS Surprise | Eaton Vance Corporation Quote

Earnings Whispers

Our proven model shows that the chances of Eaton Vance beating the Zacks Consensus Estimate in the fiscal first quarter are low. 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 an earnings beat. This is not the case here, as elaborated below.

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 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 58 cents.

Zacks Rank: Eaton Vance has a Zacks Rank #2. This increases the chance of an earnings beat, but we need to have positive ESP to be sure of the same.

Also, the Zacks Consensus Estimate has remained stable over the last seven days.

Factors to Influence Q1 Results

On the revenue front, Eaton Vance is likely to gain from the significant turnaround in the global equity markets. Further, assets under management (AUM) should witness improvement during the quarter. As of Dec 31, 2016, the company had reported a 5.3% rise in AUM from the Oct 31, 2016 level.

However, we anticipate pressure on average effective fee rates to hamper growth in investment advisory and administrative fees. Nonetheless, the top line is likely to witness a slight improvement in case outflows from higher fee strategies abatement.

Moreover, management expects operating margin to remain stable sequentially, given seasonal compensation pressures.

On the expense front, Eaton Vance's NextShares initiative will likely increase costs slightly during the quarter. Also, the company's plan to launch new fund products in the U.S. should lead to higher marketing expenses.

Moreover, we believe that non-compensation costs are likely to rise due to higher distribution expenses and fund-related costs. Hence, overall expenses should trend higher in the quarter.

Further, management projects compensation as a percentage of revenues to be around 37% owing to the traditional seasonal pressures associated with payroll tax clock resets, 401(k) funding, year-end base salary increases and stock-based compensation acceleration associated with employee retirement.

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.

VEREIT, Inc. VER is scheduled to announce results on Feb 23. The company has an Earnings ESP of +5.88% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

The Earnings ESP for EPR Properties EPR is +0.81% and it has a Zacks Rank #2. The company is slated to report on Feb 28.

Gramercy Property Trust, Inc. GPT has an Earnings ESP of +5.88% and a Zacks Rank #3. It is scheduled to report on Feb 28.

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Eaton Vance Corporation (EV): Free Stock Analysis Report

EPR Properties (EPR): Free Stock Analysis Report

Gramercy Property Trust (GPT): Free Stock Analysis Report

VEREIT Inc. (VER): Free Stock Analysis Report

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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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