Noah Holdings (NOAH) Q2 Earnings Improve, Expenses Fall

Noah Holdings Ltd. NOAH reported second-quarter 2020 net income attributable to shareholders of $42.4 million, which represents a rise of 16.4% from the prior-year quarter number.

Results benefited from a fall in expenses. However, a decline in assets under management (AUM) and lower revenues were undermining factors.

Revenues Decrease, Expenses Fall

Net revenues declined 16.7% year over year to $105.8 million. The fall can be primarily attributed to one-time commissions and other service fees, partially offset by increased recurring service fees and performance-based income.

Operating margin came in at 42.7% compared with 27.7% in the year-ago quarter.

Total operating expenses declined 32.9% to $60.6 million due to a fall in almost all the components.

As of Jun 30, 2020, total AUM was $22.6 billion, down from $26.3 billion recorded in the prior-year quarter. Outflows in private equity and public securities slightly affected AUM.

Decent Balance Sheet Position

As of Jun 30, 2020, Noah Holdings had $590.3 million in cash and cash equivalents, up from $571.4 million as of Mar 31, 2020. Notably, the company had $1.3 billion of total assets, up from $1.28 billion in the previous quarter.

Total equity as of Jun 30, 2020, was $1.1 billion, up from $1.05 billion as of Mar 31, 2020.

2020 Outlook

The company expects net income attributable to shareholders (non-GAAP basis) for 2020 between RMB900 million to RMB1billion, up from the previously mentioned RMB800 million to RMB900 million. Stronger-than-expected transaction value and performance income of public securities, improved operation efficiency, and optimistic business estimation of the second half of 2020 led to the rise in estimates.

Our Take

Noah Holdings’ second-quarter results reflect benefits from prudent expense management. Also, the company’s restructuring strategies are expected to result in improved performance. Nevertheless, net outflows are a major concern.

Noah Holdings Ltd. Price, Consensus and EPS Surprise

  Noah Holdings Ltd. Price, Consensus and EPS Surprise

Noah Holdings Ltd. price-consensus-eps-surprise-chart | Noah Holdings Ltd. Quote

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

Performance of Other Finance Stocks

Franklin Resources Inc. BEN reported third-quarter fiscal 2020 (ended Jun 30) adjusted earnings of 70 cents per share, comfortably beating the Zacks Consensus Estimate of 53 cents. Results also compared favorably with earnings of 55 cents per share recorded in the prior-year quarter.

Victory Capital Holdings VCTR reported second-quarter 2020 adjusted earnings of 89 cents per share, outpacing the Zacks Consensus Estimate of 83 cents. Also, the reported figure compares favorably with 38 cents per share reported in the prior-year quarter.

Affiliated Managers Group Inc.’s AMG second-quarter economic earnings of $2.74 per share surpassed the Zacks Consensus Estimate of $2.70. Nevertheless, the bottom line declined 17.7% year over year.

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