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Investment Management Earnings Preview: APO, FIG, OMAM

Investment management (part of the broader Finance sector) performed decently over the last several quarters. But the trend is showing a gradual reversal. Slowdown in China’s economy, a stressed energy sector, uncertainty over the timing of the Fed rate hike and several other macroeconomic factors weighed on investors’ mind. This led to huge sell offs in the equity markets across the globe in January and February. Though the markets rebounded in March, this was not enough to mitigate the downtrend witnessed during the earlier two months.

As a fall out of these matters, the investors turned risk averse, leading to significant outflows across the industry. Also, assets under management for many investment managers did not witness any improvement in the three months ended Mar 31, 2016.

Further, being globally diversified, performance of investment managers was adversely impacted by the strengthening U.S. dollar. Therefore, revenues suffered significantly.

Several investment managers have already reported their results and the picture don’t look good. Investment management stocks including BlackRock, Inc. BLK, Invesco Ltd. IVZ, Franklin Resources, Inc. BEN, Janus Capital Group, Inc. JNS and The Blackstone Group L.P. BX lagged estimates. Also, fundamentals show weakness owing to increased market volatility.

Despite this overall bearish stance, there might be a surprise in store. So, let’s have a look at the three investment management stocks that are scheduled to report their earnings tomorrow.

Apollo Global Management, LLC APO is slated to report before the opening bell. The Zacks Consensus Estimate for the company has been witnessing a downward revision over the last 30 days. Additionally, the estimate of 9 cents per share for the upcoming release indicates a year-over-year decline of about 60.87%.

Further, the company has a Zacks Rank #3 (Hold) with an">Earnings ESP of 0.00%, making it difficult to conclusively predict an earnings beat this quarter.

However, Apollo Global boosts a decent surprise history as indicated by the chart below:

Fortress Investment Group LLC FIG is also scheduled to announce results before the market opens. The Zacks Consensus Estimate of 18 cents for the company for the upcoming release reflects year-over-year growth of about 50.00%.

Additionally, Fortress Investment has a decent earnings surprise history, as evident from the chart given below:

However, Fortress Investment’s activities during the quarter were inadequate to win analysts’ confidence, as evident from two downward revisions in earnings estimates (versus no upward revision) over the last 30 days. Notably, the Zacks Consensus Estimate fell 28% over the same time frame.

Also, our quantitative model does not predict an earnings beat. The company has a Zacks Rank #4 (Sell) with an Earnings ESP of 0.00%. We caution against Sell-rated stocks (Zacks Rank #4 or #5) going into an earnings announcement, especially if the company has seen negative estimate revisions.

OM Asset Management plc OMAM will announce results before the market opens. Similar to the above-mentioned two investment management stocks, the Zacks Consensus Estimate for OM Asset Management witnessed downward revisions for the last 30 days. Further, the estimate of 27 cents for the upcoming release indicates a year-over-year decline of about 13.98%.

With an Earnings ESP of 0.00% and Zacks Rank #2 (Buy), it is difficult to predict earnings beat for OM Asset Management in the upcoming release. Though Zacks Rank #2 increases the predictive power of earnings beat, we also need a positive Earnings ESP to be sure of the same.

Notably, the earnings surprise history for OM Asset Management looks decent.

Irrespective of an earnings beat or miss, investors should focus on the companies’ fundamentals to make investment decisions. Therefore, don’t forget to check our full write-up on earnings releases of these stocks later.

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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
JANUS CAP GRP (JNS): Free Stock Analysis Report
INVESCO LTD (IVZ): Free Stock Analysis Report
BLACKSTONE GRP (BX): Free Stock Analysis Report
FRANKLIN RESOUR (BEN): Free Stock Analysis Report
BLACKROCK INC (BLK): Free Stock Analysis Report
FORTRESS INVEST (FIG): Free Stock Analysis Report
OM ASSET MGMT (OMAM): Free Stock Analysis Report
APOLLO GLOBAL-A (APO): Free Stock Analysis Report
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