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Why Is Affiliated Managers (AMG) Down 9.6% Since Last Earnings Report?

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It has been about a month since the last earnings report for Affiliated Managers Group (AMG - Free Report) . Shares have lost about 9.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Affiliated Managers due for a breakout? 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 Beat on Higher Revenues

Affiliated Managers’ third-quarter 2021 economic earnings of $4.00 per share surpassed the Zacks Consensus Estimate of $3.93. The bottom line grew 22.3% year over year.

Results were aided by an improvement in revenues and growth in AUM balance, partly offset by higher expenses. Further, the company had a robust liquidity position.

Economic net income was $168.5 million, up 10.8% from the prior-year quarter.

Revenues & AUM Improve, Expenses Rise

Total revenues improved 16.2% year over year to $575.2 million. However, the top line lagged the Zacks Consensus Estimate of $599.7 million.

Adjusted EBITDA was $227.7 million, jumping 25.7% from the year-ago quarter.

Total expenses increased 10.1% year over year to $395.3 million. An increase in all cost components, except for intangible amortization and impairment costs, and depreciation and other amortization costs, led to the rise.

As of Sep 30, 2021, total AUM was $747.8 billion, up 14.4% year over year. Net client cash inflows in the quarter were $3.3 billion.

Capital & Liquidity Position Decent

As of Sep 30, 2021, Affiliated Managers had $1.13 billion in cash and cash equivalents compared with $1.04 billion as of Dec 31, 2020. The company had $2.49 billion of debt, which increased 7.8% from the Dec 31, 2020 level.

Shareholders’ equity as of Sep 30, 2021, was $2.64 billion compared with $2.78 billion as of Dec 31, 2020.

Share Repurchase Update

In the reported quarter, the company repurchased shares worth $100 million.

Fourth-Quarter 2021 Outlook

Management expects adjusted EBITDA of $290-$340 million based on the present AUM levels. The guidance includes a seasonally higher performance fee range of $60-$100 million and the full impact of Parnassus deal.

Interest expenses are expected to be $29 million, in line with the prior quarter. Controlling interest depreciation is expected to remain at the third-quarter 2021 level of $2 million.

The company’s share of reported amortization and impairments is expected to be $43 million, 19.4% higher than the third-quarter level of $36 million. Intangible related deferred taxes are projected to be $12 million, stable sequentially.

Other economic items (excluding any mark-to-market impact) are anticipated to be $1 million.

Adjusted weighted average share count is estimated to be $41.7 million.

GAAP tax rate is expected to be 25%. Cash tax rate is expected to be 18%.

The company expects to repurchase $100 million worth of shares, subject to market conditions and new investments.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 16.18% due to these changes.

VGM Scores

At this time, 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 B. 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.


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