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Brookfield (BAM) to Report Q1 Earnings: What's in the Cards?

Zacks Equity Research

Brookfield Asset Management BAM is scheduled to report first-quarter 2020 results on May 14, before the opening bell. The company’s quarterly earnings per share (EPS) are expected to have registered year-over-year growth.

In the last reported quarter, this global investment management posted net income per share of 74 cents per share, lower than $1.87 reported in fourth-quarter 2018. Funds from operations (FFO) per share also declined 16.3% year over year to $1.13.

Let’s see how things have shaped up prior to this announcement.

Factors at Play

In first-quarter 2020, Brookfield closed its latest flagship global infrastructure fund, Brookfield Infrastructure Fund IV (“BIF IV”), with total equity commitments of $20 billion. This exceeded the original fund target of $17 billion. With this, the company is expected to have witnessed organic growth in its asset management business, and deployed significant amount in targeted infrastructure investments and acquisitions. These are expected to get reflected in its revenues in the quarter to be reported.

The company’s investment in capital-intensive industries is also expected to have driven fee growth. Moreover, in December end, it completed the acquisition of a rail operator in North America, a cell-tower business in the U.K. and a portfolio of pipeline assets. These recently-acquired businesses are also expected to have driven revenues and FFO growth in the March-end quarter.

Further, the long-term nature of the company’s contractual lease arrangements is expected to have provided stability to top-line growth amid the uncertain market condition during the first quarter.

Additionally, the capital committed to the company’s flagship Oaktree distressed debt fund became fee earning as of Jan 1, 2020. This is expected to have strengthened Brookfield’s fee-related earnings in the January-March quarter.

Brookfield invests in office, retail, industrial, multifamily, hospitality and other properties in its real estate segment. Amid travel disruptions and social distancing measures, the hospitality and retail sectors are expected to have been severely impacted. With hotel and retail assets in its portfolio, the company is expected to have witnessed low mall traffic at its retail properties and high booking cancellations at its hospitality properties. This is expected to have thwarted its performance in first-quarter 2020.

As such, the Zacks Consensus Estimate of EPS has been unchanged at 48 cents over the past month. Nonetheless, it suggests growth of 23.1% from the year-ago reported figure.

Earnings Whispers

Here is what our quantitative model predicts:

Brookfield does not have the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

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 Brookfield is 0.00%.

Zacks Rank: Brookfield carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks That Warrant a Look

Here are a few companies in the Finance sector that you may want to consider, as our model shows that these have the right combination of elements to report a positive surprise this quarter:

XP Inc. XP, scheduled to release earnings on May 12, has an Earnings ESP of +3.12% and a Zacks Rank of 3 at present.

VEREIT, Inc. VER, set to report quarterly numbers on May 20, currently has an Earnings ESP of +5.15% and a Zacks Rank of 3.

CBL Properties CBL, slated to release earnings results on May 18, currently has an Earnings ESP of +11.11% and a Zacks Rank #2 (Buy).

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