Alternative Investment

3 Asset Management Stocks Set to Pull Off Earnings Beat in Q4

One of the largest and well-known asset management stocks – BlackRock Inc. BLK – kicked off fourth-quarter earnings on Jan 13. Amid a challenging operating environment, BLK handily surpassed the Zacks Consensus Estimate. Lower total expenses more than offset decline in revenues and assets under management (AUM) balance. Further, due to the expected economic slowdown, BlackRock announced layoffs.

The fourth quarter of 2022 was among the toughest operating periods for asset managers globally. So, it won’t be easy for the industry players to overcome challenges and beat the estimates. But we are using our proprietary methodology to find stocks that are poised to surpass the Zacks Consensus Estimate in the fourth quarter. By using the Zacks Stock Screener, we have identified three such asset management stocks — Artisan Partners Asset Management Inc. APAM, Ameriprise Financial, Inc. AMP and Invesco Ltd. IVZ.  

These stocks have the ideal combination of the two key ingredients — positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to surpass expectations. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Our proprietary methodology, Earnings ESP, shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. And research shows that for stocks with this combination of rank and ESP, chances of a positive earnings surprise are as high as 70%.

Before we go into the details regarding above-mentioned asset managers, let’s first understand the factors that are likely to have influenced quarterly performance.

The performance of the equity markets during the fourth quarter was extremely volatile. Though the S&P 500 Index gained 7% in the quarter, it was marked by huge volatility as the investors continued to be cautious about the recession risk. Thus, market value of assets witnessed a decline, hurting the performance fees.

Further, as the U.S. dollar gained strength, FX unfavorably impacted the asset managers performance. All these headwinds hurt the asset price and also resulted in net outflows.

On the cost front, as the asset managers continued to optimize operations by digital initiatives, expenses are likely to have been manageable. But fears of recession are likely to have driven cost cutting among many industry players, which might have led to one-time restructuring expenses.

Q4 Earnings Expectations

The Zacks Finance sector’s (of which investment management is part) earnings are projected to decline 9.2% year over year in the fourth quarter. This compares with 10.8% fall recorded in third-quarter 2022.

(For a detailed look at the earnings growth projections for this sector and others, please read our Earnings Preview.)

3 Potential Safe Bets

Artisan Partners, based in Milwaukee, WI, is focused on providing high-value added, active investment strategies to clients globally. APAM’s investment teams manage a broad range of U.S., non-U.S. and global investment strategies that are diversified by asset class, market cap and investment style.

Similar to other industry players, APAM is facing a tough operating environment, which is likely to have hampered net inflows and AUM growth in the fourth quarter. Further, weak equity market performance and huge volatility are headwinds. Thus, these are expected to have hurt the company’s revenues in the to-be-reported quarter.

Artisan Partners is scheduled to announce results on Jan 31, after market close. The Zacks Consensus Estimate for its fourth-quarter earnings of 62 cents per share implies a plunge of 51.9% from the year-ago reported figure. APAM has an Earnings ESP of +2.44% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Artisan Partners Asset Management Inc. Price and EPS Surprise

Artisan Partners Asset Management Inc. Price and EPS Surprise

Artisan Partners Asset Management Inc. Price and EPS Surprise

Artisan Partners Asset Management Inc. price-eps-surprise | Artisan Partners Asset Management Inc. Quote

Headquartered in Minneapolis, MN, Ameriprise, owns, manages and administers assets worth almost $1 trillion. Apart from providing asset management services, the company offers certain insurance services.

AMP’s operations are majorly dependent on the performance of the equity markets and client activities. Hence, increased market volatility due to several geopolitical and macroeconomic concerns, is likely to have marred the company’s quarterly performance in the to-be-reported quarter. Ameriprise is scheduled to announce fourth-quarter and full-year 2022 numbers on Jan 25, after the closing bell.

The Zacks Consensus Estimate for fourth-quarter earnings of $6.35 indicates a rise of 3.3% from the year-ago reported figure. AMP has an Earnings ESP of +1.28% and a Zacks Rank #2 (Buy).

Ameriprise Financial, Inc. Price and EPS Surprise

Ameriprise Financial, Inc. Price and EPS Surprise

Ameriprise Financial, Inc. Price and EPS Surprise

Ameriprise Financial, Inc. price-eps-surprise | Ameriprise Financial, Inc. Quote

Invesco, based in Atlanta, GA, offers a wide range of investment products and services. IVZ has offices across more than 20 countries and AUM worth almost $1.3 trillion. With the support of a global operating platform, the company distributes a broad range of investment products and services.

Despite having a robust institutional pipeline, diverse product offerings and alternative investment strategies, solid retail channels and synergies from opportunistic acquisitions, IVZ’s revenues and AUM are likely to have been under pressure in the fourth quarter of 2022. The industry-wide headwinds of poor equity market performance and fears of recession are the main reasons for this.

Invesco is slated to announce results on Jan 24, before market opens. The Zacks Consensus Estimate for the company’s fourth-quarter earnings is pegged at 36 cents, implying a plunge of 58.1% year over year. IVZ has an Earnings ESP of +4.17% and a Zacks Rank #3.

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

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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BlackRock, Inc. (BLK) : Free Stock Analysis Report

Invesco Ltd. (IVZ) : Free Stock Analysis Report

Ameriprise Financial, Inc. (AMP) : Free Stock Analysis Report

Artisan Partners Asset Management Inc. (APAM) : Free Stock Analysis Report

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