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Invesco (IVZ) Q1 Earnings: What to Expect from the Stock?

Invesco Ltd. IVZ is scheduled to report first-quarter 2016 results on Thursday, Apr 28, before the market opens.

Last quarter, Invesco’s adjusted earnings lagged the Zacks Consensus Estimate due to pressure on revenues, partly offset by stable expenses.

The question is will Invesco report dismal earnings again. Or will the company be able to overcome the tough operating backdrop? Let’s see how things have shaped up for this announcement.

Factors Impacting Q1 Results

Despite initiating a business transformation program, Invesco should witness a rise in operating expenses, given the continuous investment in franchise. Further, incremental implementation costs associated with its business transformation program are anticipated to be nearly $85 million in 2016. So, a certain portion of this expense should be recorded in the upcoming release.

On the revenue front, the strengthening dollar should exert pressure on Invesco’s assets under management mix and management fees. Nevertheless, the company remains optimistic about institutional flows and expects organic growth to continue in the quarter.

However, per Invesco’s latest preliminary month-end AUM report, as of Mar 31, 2016, total AUM declined nearly 0.5% sequentially, depicting pressure on Equity, Fixed Income and Balanced AUM. Increased equity market volatility in the first two months of 2016 was largely responsible for this marginal fall in AUM.

Therefore, overall top-line growth should remain muted during the quarter.

Further, an anticipated rise in expenses and an adverse foreign exchange impact will likely trigger a decline in Invesco’s margin.

Invesco’s activities during the quarter were inadequate to win analysts’ confidence. As a result, the Zacks Consensus Estimate remained stable at 54 cents over the last seven days.

Earnings Whispers

The Zacks Consensus Estimate for Invesco has been witnessing a constant downward revision in the last 60 days. Also, the estimate of 54 cents for the upcoming release indicates a year-over-year decline of about 14.88%.

Further, Invesco doesn’t boast a decent surprise history. Though the company surpassed the Zacks Consensus Estimate in two of the trailing four quarters, it has a positive average beat of a mere 0.02% in the trailing four quarters.

Notably, our quantitative model also does not predict an earnings beat for Invesco this time. Here is what it indicates:

Chances of Invesco beating the Zacks Consensus Estimate in the first quarter are quite low. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #3 (Hold) or better for this to happen.

Zacks ESP: The Earnings ESP for Invesco is 0.00%. This is because the Most Accurate estimate of 54 cents stands on par with Zacks Consensus Estimate.

Zacks Rank: Invesco’s Zacks Rank #3 increases the predictive power of the ESP. However, we also need to have a positive ESP to be confident of an earnings surprise call.

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:

Federated Investors, Inc. FII has an Earnings ESP of +2.33% and carries a Zacks Rank #3. The company is scheduled to report results on Apr 28.

The Earnings ESP for Legg Mason Inc. LM is +7.69% and it has a Zacks Rank #3. The company is slated to report on Apr 29.

Walker & Dunlop, Inc. WD has an Earnings ESP of +6.25% and holds a Zacks Rank #3. It will report on May 4.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
INVESCO LTD (IVZ): Free Stock Analysis Report
LEGG MASON INC (LM): Free Stock Analysis Report
FEDERATED INVST (FII): Free Stock Analysis Report
WALKER & DUNLOP (WD): Free Stock Analysis Report
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