We expect Legg Mason Inc. LM to beat earnings expectations when it reports fiscal fourth-quarter 2016 (ended Mar 31) results on Apr 29, before the opening bell.Notably, the Baltimore-based global asset management firm surpassed earnings estimates in three of the trailing four quarters, with an average beat of 10.29%. Why a Likely Positive Surprise?Our proven model shows that Legg Mason is likely to beat earnings because it has the right combination of two key components.Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, stands at +7.69%. This is very meaningful and a leading indicator of a likely positive earnings surprise.Zacks Rank #3 (Hold): Note that stocks with a Zacks Ranks #1 (Strong Buy), 2 (Buy) or 3 (Hold) have a significantly higher chance of beating earnings. Conversely, the Sell-rated stocks (#4 or #5) should never be considered going into an earnings announcement.The combination of Legg Mason’s Zacks Rank #3 and +7.69% ESP makes us confident of an earnings beat.What to ExpectAmid several issues including the concerns over slowdown of the Chinese economy and the continued volatility in commodity prices, the U.S. markets remained choppy from the start of the year, and only returned to the positive territory after mid February.The company reported a decrease in its AUM for Mar 2016. Month end AUM was $669.6 billion, down from $702.7 billion in the prior year period. March’s AUM reflected liquidity outflows of $6.8 billion and a positive foreign exchange impact of about $4.1 billion.Also, driven by outflows in fixed income and equity, the company experienced long-term outflows of $3.2 billion for March, resulting in $13.1 billion of outflows for the fiscal fourth-quarter. Despite the global uncertainties and market volatility that prevailed in the quarter, we believe Legg Mason’s diversified nature of business will boost its fiscal fourth-quarter results. Also, the acquisition of 75% stake in Sidney-based RARE Infrastructure, Ltd, a global listed infrastructure specialist will continue lending support to Legg Mason’s upcoming results.Notably, while management projects performance fees within $5 million, we expect fees to surpass the projected range buoyed by improved performance at Brandywine and Martin Currie, similar to the previous quarter.Further, management expects a challenging quarter for advisory fee revenue, given the decline in AUM during fiscal third quarter along with impact of an asset class and product mix shift and one less day in the fiscal fourth quarter.During the third quarter of fiscal 2016, the compensation and benefits ratio came in at 53%, in line with its guidance of the 53–54% range. However, for fourth quarter management expects the ratio to rise to 54% to 55%, due to seasonality.Additionally, in fiscal fourth quarter, the operating margin is expected to be affected by the usual increase in seasonal compensation cost and one less day in the quarter.Notably, related to the implementation of the Royce Management Equity Plan, Legg Mason expects to incur a non-cash charge between approximately $35,000 and $50,000 upon the initial issuance of management equity plan units, in the quarter. Apart from this, as a result of several deals announced in the beginning of the quarter, the company is likely to incur related charges.Activities of Legg Mason during the quarter failed to win analysts’ confidence. As a result, the Zacks Consensus Estimate for the quarter remained unchanged at 13 cents over the last seven days.Stocks That Warrant a LookHere are some 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 a Zacks Rank #3. The company will release results on Apr 28.Credit Acceptance Corp. CACC has an Earnings ESP of +0.53% and carries a Zacks Rank #2. It is expected to report results on May 2.Walker & Dunlop, Inc. WD has an Earnings ESP of +6.25% and holds a Zacks Rank #3. It will report results on May 4.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 >>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 CREDIT ACCEPT (CACC): 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 To read this article on Zacks.com click here. Zacks Investment Research