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Will Higher Costs Hurt Eaton Vance's (EV) Q2 Earnings? - Analyst Blog

Eaton Vance Corp.EV is scheduled to report second-quarter fiscal 2015 (ended Apr 30) results on May 20, before the market opens.

Last quarter, Eaton Vance's adjusted earnings lagged the Zacks Consensus Estimate. Results reflected pressure on top line and higher operating expenses.

Will Eaton Vance disappoint yet again this earnings season? Let us see how things have shaped up for this announcement.

Factors Impacting Q2 Results

Elevated operating expenses remain a major concern for Eaton Vance. The company's NextShares initiative is anticipated to push expenses up during the quarter. The company expects expenditure related to this initiative to be nearly $8 million for fiscal 2015.

Further, we believe that compensation expenses should increase during the quarter, similar to the first quarter. The company predicts compensation expenses to be over 33% of revenues in the quarter.

Moreover, non-compensation expenditure will increase owing to higher distribution expenses and fund-related costs. Hence, overall expenses should trend higher in the quarter.

On the revenue front, Eaton Vance does not face any substantial threat from the overall low interest rate environment as it mainly deals in asset management business. Additionally, we believe the company's investment advisory and administrative fees will improve, as major U.S. equity indexes witnessed an uptick during the quarter.

Eaton Vance's activities during the quarter were inadequate to win analysts' confidence. Thus, the Zacks Consensus Estimate remained stable at 59 cents per share over the last 7 days.

Earnings Whispers

Our proven model does not conclusively show that Eaton Vance is likely to beat the Zacks Consensus Estimate in the fiscal second 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.

Stocks That Warrant a Look

Some better-ranked finance stocks include The Blackstone Group L.P. BX , Janus Capital Group, Inc. JNS and Lazard Ltd. LAZ . All these stocks carry a Zacks Rank #2 (Buy).

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JANUS CAP GRP (JNS): Free Stock Analysis Report

BLACKSTONE GRP (BX): Free Stock Analysis Report

LAZARD LTD (LAZ): Free Stock Analysis Report

EATON VANCE (EV): 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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