Yahoo Finance Why Is Affiliated Managers (AMG) Up 10% Since Last Earnings Report?
It has been about a month since the last earnings report for Affiliated Managers Group (AMG). Shares have added about 10% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Affiliated Managers due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Affiliated Managers Q3 Earnings Top Estimates, AUM Down
Affiliated Managers’ third-quarter 2022 economic earnings of $4.21 per share handily surpassed the Zacks Consensus Estimate of $3.92. The bottom line grew 5.3% from the prior-year number. Our estimate for economic earnings per share was $3.96.
Results were aided by an improvement in revenues, partly offset by higher expenses and a fall in AUM balance. Further, the company had a robust liquidity position.
Economic net income was $166.4 million, down 1.2% from the prior-year quarter. Our estimate for this metric was $156.1 million.
Revenues & Expenses Rise, AUM Falls
Total revenues rose marginally year over year to $578.6 million. Also, the top line beat the Zacks Consensus Estimate of $553.3 million. Our estimate for total revenues was $564.8 million.
Adjusted EBITDA was $220.4 million, down 3.2% from the year-ago quarter.
Total expenses increased 7.6% to $425.4 million. An increase in all cost components, except for depreciation and other amortization, and other expenses, led to the rise.
As of Sep 30, 2022, total AUM was $644.6 billion, which declined 13.8%. Net client cash outflows in the quarter were $8.8 billion.
Capital & Liquidity Position Decent
As of Sep 30, 2022, Affiliated Managers had $622.9 million in cash and cash equivalents compared with $908.5 billion as of Dec 31, 2021. The company had $2.53 billion of debt, which increased 1.8% from the Dec 31, 2021 level.
Shareholders’ equity as of Sep 30, 2022, was $2.77 billion compared with $2.79 billion as of Dec 31, 2021.
Share Repurchase Update
In the reported quarter, the company repurchased shares worth $80 million.
Fourth-Quarter 2022 Outlook
Management expects adjusted EBITDA to be $330-$380 million range. This guidance includes the removal of $10 million of EBITDA and nearly $30 billion of AUM following the close of the Baring transaction. The range does not include the impact of the company's latest new affiliate investment, which will be reported on a one-quarter lag beginning in the second quarter of 2023 and is expected to add almost 1% to 2% to EBITDA on a full-year basis. Our estimate for adjusted EBITDA is $332.3 million.
Interest expenses are expected to be $29 million. Controlling interest depreciation is expected to remain at the third-quarter level of $2 million.
Management projects net income (controlling interest) to be in the range of $198-$236 million. Our estimate for the metric is $199.4 million.
The company’s share of reported amortization and impairments is expected to be $35 million. Our estimate for the metric is $35.1 million.
Intangible-related deferred taxes are projected to be $16 million, higher than the third-quarter level of $13 million.
Other economic items (excluding any mark-to-market impact) are anticipated to be nil.
Further, economic net income is anticipated to be between $249 million and $287 million. Also, economic earnings per share (EPS) is expected to be in the $6.38-$7.35 range. Our estimates for economic net income and economic EPS are $250.4 million and $6.45, respectively.
The adjusted weighted average share count is estimated to be $39 million.
The GAAP tax rate is expected to be 25%. The cash tax rate is expected to be 20%.
2022 Outlook
Given the solid year-to-date performance, management expects economic earnings per share to grow almost 10% in 2022. Our estimate for the same is $19.34 per share, suggesting a 5.8% rise on a year-over-year basis.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
The consensus estimate has shifted 21.64% due to these changes.
VGM Scores
Currently, Affiliated Managers has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Affiliated Managers has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Affiliated Managers belongs to the Zacks Financial - Investment Management industry. Another stock from the same industry, Franklin Resources (BEN), has gained 13.1% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Franklin Resources reported revenues of $1.94 billion in the last reported quarter, representing a year-over-year change of -11.1%. EPS of $0.78 for the same period compares with $1.26 a year ago.
Franklin Resources is expected to post earnings of $0.56 per share for the current quarter, representing a year-over-year change of -48.2%. Over the last 30 days, the Zacks Consensus Estimate has changed -7.7%.
Franklin Resources has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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Affiliated Managers Group, Inc. (AMG) : Free Stock Analysis Report
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