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Outflows, Top-Line Pressure Hurt Affiliated Managers (AMG)

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Affiliated Managers Group, Inc. (AMG - Free Report) has substantial intangible assets on its balance sheet, which is a major concern. Moreover, owing to the tough operating backdrop and uncertainty of the capital markets, revenue growth pressure is likely to continue for AMG in the near term.

Analysts also do not seem optimistic regarding the company’s earnings growth prospects. The Zacks Consensus Estimate for its 2022 earnings has moved 3.2% lower over the past 30 days. Thus, Affiliated Managers currently carries a Zacks Rank #4 (Sell).

So far this year, shares of AMG have lost 10.8% compared with the industry’s 14.7% decline.

 

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Looking at the fundamentals, Affiliated Managers’ revenue growth has been volatile for the past several years. On the back of solid performance of its affiliates and strong equity markets, the company’s revenues improved in 2017 and 2018. Revenues witnessed year-over-year growth in 2021 as well. However, between 2014 and 2021, revenues declined, seeing a compound annual growth rate of 0.6% amid the challenging operating backdrop.

Although the company’s portfolio of investment products provides a competitive edge when it comes to fulfilling the diverse needs of clients, the uncertainty of the capital markets might put pressure on revenues in the near term.

The company’s affiliates have been witnessing overall net outflows over the past few years. Net client cash outflows were $18.5 billion in 2021, $61.8 billion in 2020 and $53.5 billion in 2019. Though the company’s differentiated product categories are likely to support cash flows across channels, a challenging operating backdrop is expected to keep investors on the sideline in the near term.

As of Dec 31, 2021, intangible assets (goodwill and acquired client relationships) constituted 52.4% of AMG’s total assets. The assets are subject to annual impairment reviews. Several factors may initiate the impairment of the book value of such assets, due to which the value of these assets may have to be written down. In such a case, the company’s financials will be adversely impacted.

Nevertheless, successful partnerships, diverse product offerings, improving assets under management balance and focusing on strengthening the retail market operations are expected to keep supporting Affiliated Managers’ profitability.

Stocks Worth a Look

A couple of better-ranked stocks from the finance space are East West Bancorp (EWBC - Free Report) and Ameriprise Financial, Inc. (AMP - Free Report) . At present, both EWBC and AMP carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the past six months, shares of East West Bancorp have gained 6.7%, whereas Ameriprise has rallied 16.2%.

Over the past 60 days, the Zacks Consensus Estimate for East West Bancorp’s current-year earnings has been revised 4.7% upward, while the same for Ameriprise has moved marginally north.


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Ameriprise Financial, Inc. (AMP) - free report >>

Affiliated Managers Group, Inc. (AMG) - free report >>

East West Bancorp, Inc. (EWBC) - free report >>