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Will Invesco (Ivz) Disappoint Again this Earnings Season?

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Invesco Ltd.IVZ is slated to release fourth-quarter and full-year 2016 results on Jan 26, before the market opens.

Last quarter, the company's adjusted earnings lagged the Zacks Consensus Estimate by a penny, primarily due to a decline in revenues. However, lower expenses, improvement in assets under management (AUM) and long-term inflows acted as tailwinds.

Moreover, following the earnings miss, shares of Invesco lost nearly 3% during the three months ended Dec 31, 2016.

Analysts seem to have a neutral stance on Invesco's performance. The Zacks Consensus Estimate for the company's just concluded quarter remained stable at 58 cents over the last seven days.

Further, Invesco does not have a decent earnings surprise history. The company's earnings lagged the Zacks Consensus Estimate in three of the trailing four quarters as evident from the chart below:

Invesco PLC Price and EPS Surprise

Invesco PLC Price and EPS Surprise | Invesco PLC Quote

Earnings Whispers

Our proven model indicates that it is less likely that Invesco will beat the Zacks Consensus Estimate this time around. This 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) to have a significant chance of beating estimates. 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 Invesco is -1.72%. This is because the Most Accurate estimate of 57 cents is below the Zacks Consensus Estimate of 58 cents.

Zacks Rank : Invesco's Zacks Rank #3 increases the predictive power of ESP. However, we also need a positive Earnings ESP to be confident of an earnings beat.

Factors to Influence Q4 Results

Invesco's expenses in the fourth-quarter are likely to remain more or less stable. Management expects adjusted G&A (General and administrative) expenses to be in line with the third-quarter levels. Further, the company expects expense relief of around $30-$45 million to accrue from its cost optimization activities in 2017. Certain portion of this benefit is expected to be recorded in the upcoming release.

Nevertheless, marketing expenses are expected to rise in the range of $32-$35 million for the quarter.

On the revenue front, management expects net revenue yield to remain stable sequentially at 42 basis points, and performance fee is expected to be around $5 million. Further, the company expects adjusted other revenues to increase sequentially and come in the range of $23-$25 million.

Also, as the company continues to grow organically and employ cost curtailment techniques, margins are expected to be on an upward trajectory, assuming the market remains flat and the pound is down at the present level.

However, per Invesco's latest preliminary month-end AUM report, as of Dec 31, 2016, total AUM fell nearly 1% sequentially, depicting deteriorated Equity, Fixed Income and Balanced AUMs. This decline, along with modest market performance in the quarter, indicates that overall revenues might be adversely affected to some extent.

Stocks to Consider

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

SEI Investments Co. SEIC is scheduled to report its results on Jan 25. It has an Earnings ESP of +6.00% and carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Raymond James Financial, Inc. RJF has an Earnings ESP of +1.00% and a Zacks Rank #2. It is expected to report results on Jan 25.

T. Rowe Price Group, Inc. TROW is expected to release its results on Jan 26. The company has an Earnings ESP of +2.16% and carries a Zacks Rank #3.

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Raymond James Financial, Inc. (RJF): Free Stock Analysis Report

T. Rowe Price Group, Inc. (TROW): Free Stock Analysis Report

Invesco PLC (IVZ): Free Stock Analysis Report

SEI Investments Company (SEIC): 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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