Why Is Affiliated Managers (AMG) Up 2% Since Last Earnings Report?
It has been about a month since the last earnings report for Affiliated Managers Group (AMG). Shares have added about 2% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Affiliated Managers' Q2 Earnings Top Estimates, Revenues Fall Y/Y
Affiliated Managers’ second-quarter 2020 economic earnings of $2.74 per share surpassed the Zacks Consensus Estimate of $2.70. However, the bottom line declined 17.7% year over year.
Results reflected lower operating expenses and a robust liquidity position. However, lower revenues, fall in AUM balance and decline in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were headwinds.
Economic net income was $129.6 million, down 23.8% from the prior-year quarter.
Revenues & AUM Down, Expenses Fall
Total revenues fell 20.4% year over year to $471.1 million. However, the top line beat the Zacks Consensus Estimate of $464 million.
Adjusted EBITDA was $162.1 million, down 26.1% from the year-ago quarter.
Total expenses decreased nearly 1% from the prior-year quarter to $409.6 million. Decline in compensation and related expenses, and selling, general and administrative costs primarily led to the fall.
As of Jun 30, 2020, total AUM was $638.4 billion, down 17.3% year over year. Net client cash outflows of $18.2 billion hurt AUM.
Capital & Liquidity Position Decent
As of Jun 30, 2020, Affiliated Managers had $681.6 million in cash and cash equivalents compared with $539.6 million on Dec 31, 2019. The company had $2 billion of debt, up 13.9% from the Dec 31, 2019 level.
Shareholders’ equity as of Jun 30, 2020 was $2.9 billion, on par with the Dec 31, 2019 level.
Share Repurchase Update
During the quarter, the company repurchased shares worth $50 million.
Third-Quarter 2020 Outlook
Management expects adjusted EBITDA of $170-$175 million. Performance fee is anticipated to be seasonally lower in the range of $1-$5 million.
Interest expenses are expected to be $23 million, suggesting 4.5% increase from the prior quarter level. The company’s share of reported amortization and impairments are expected to be $50 million, down 41.9% sequentially.
Adjusted weighted average share count is estimated to be $46.5 million.
GAAP tax rate is expected to be 25%. Additionally, cash tax rate is expected to be 18%.
Intangible-related deferred taxes are expected to be $6 million. Other economic items are anticipated to be $1 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
At this time, Affiliated Managers has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Affiliated Managers has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Affiliated Managers Group, Inc. (AMG): Free Stock Analysis Report
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