Improvement in AUM to Support Invesco's (IVZ) Q3 Earnings

Zacks Equity Research
·4-min read

Invesco IVZ is slated to announce third-quarter 2020 results on Oct 27, before market open. Its revenues and earnings are expected to have witnessed a decline in the quarter on a year-over-year basis.

In the last reported quarter, the company’s adjusted earnings missed the Zacks Consensus Estimate. An increase in operating expenses, lower revenues and net outflows were the major undermining factors.

Invesco does not have an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in one and lagged in three of the trailing four quarters.

Invesco Ltd. Price and EPS Surprise

 

Invesco Ltd. Price and EPS Surprise
Invesco Ltd. Price and EPS Surprise

Invesco Ltd. price-eps-surprise | Invesco Ltd. Quote

Nevertheless, the company’s activities and business prospects in the to-be-reported quarter encouraged analysts to revise estimates upward. The Zacks Consensus Estimate for Invesco’s third-quarter earnings of 48 cents has been revised 9.1% upward over the past 30 days. However, the figure indicates a decline of 31.4% from the year-ago quarter’s reported number.

The consensus estimate for sales is pegged at $1.54 billion, which suggests a 10.4% decline year over year.

Before we take a look at what our quantitative model predicts, let’s check the factors that are expected to have influenced Invesco’s third-quarter performance.

Per the monthly metrics data published by Invesco, preliminary total AUM as of Sep 30, 2020, was $1,218.2 billion, up 6.4% from the Jun 30, 2020-level. The sequential rise was mainly driven by net inflows.

Thus, supported by growth in assets, the company’s performance fee is expected to have been positively impacted. The Zacks Consensus Estimate for performance fees for the to-be-reported quarter is pegged at $9.25 million, indicating substantial growth from the previous quarter’s reported number.

Moreover, the consensus estimate for investment management fee is pegged at $1.15 billion, which indicates a rise of 10.9% sequentially.

The consensus mark for service and distribution fees of $334 million indicates a marginal sequential rise.

On the cost front, while Invesco’s initiatives to manage costs have helped in improving efficiency, continued rise in compensation and marketing costs have led to an increase in overall expenses over the past few years. Moreover, the company expects third-quarter operating expenses of $675 million.

Marketing expenses are projected to modestly increase on a sequential basis.

Earnings Whispers

Per the Zacks model, the chances of Invesco beating the Zacks Consensus Estimate this time are high. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: The Earnings ESP for Invesco is +2.02%.

Zacks Rank: The company currently carries a Zacks Rank #3.

Other Stocks That Warrant a Look

Here are some other finance stocks you may want to consider as these too have the right combination of elements to post an earnings beat in their upcoming releases, per our model.

The Earnings ESP for CullenFrost Bankers CFR is +1.57% and the company carries a Zacks Rank of 3 at present. It is slated to report quarterly results on Oct 29. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Moody's Corporation MCO is set to release earnings figures on Oct 29. The company, which carries a Zacks Rank #2 (Buy) at present, has an Earnings ESP of +1.93%.

The Earnings ESP for BankUnited BKU is +6.10% and the company carries a Zacks Rank #3, currently. It is scheduled to report quarterly numbers on Oct 28.

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