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Why Is Affiliated Managers (AMG) Down 0.7% 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 0.7% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

Affiliated Managers Q2 Earnings Beat as Revenues Rise

Affiliated Managers’ second-quarter 2022 economic earnings of $4.03 per share surpassed the Zacks Consensus Estimate of $4.00. The bottom line was on par with the prior-year number. Our estimate for economic earnings per share was $4.27.

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 $160.5 million, down 6.3% from the prior-year quarter.

Revenues & Expenses Rise, AUM Falls

Total revenues rose 3% year over year to $604.1 million. Also, the top line beat the Zacks Consensus Estimate of $592.4 million. Our estimate for total revenues was $626 million.

Adjusted EBITDA was $213.4 million, down 6.1% from the year-ago quarter. Our estimate for the same was $218.9 million.

Total expenses increased 2.7% to $400.6 million. An increase in all cost components, except for other expenses, led to the rise.

As of Jun 30, 2022, total AUM was $690.9 billion, which declined 8.6% year over year. Net client cash outflows in the quarter were $11.4 billion.

Capital & Liquidity Position Decent

As of Jun 30, 2022, Affiliated Managers had $606.8 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 Jun 30, 2022, was $2.74 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.

Third-Quarter 2022 Outlook

Management expects adjusted EBITDA of $210 million based on the present AUM levels. The guidance also includes growth in performance fees to be similar to the second quarter 2022 level.

Interest expenses are expected to be $27 million, in line with the prior quarter. Controlling interest depreciation is expected to remain at the second-quarter level of $2 million.

The company’s share of reported amortization and impairments is expected to be $40 million, down from $43 million in the prior quarter.

Intangible related deferred taxes are projected to be $13 million, similar to the second quarter level.

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

Adjusted weighted average share count is estimated to be $39.4 million.

The GAAP tax rate is expected to be 25%. The cash tax rate is expected to be 16%.

2022 Outlook

Given the solid year-to-date performance, management expects economic earnings per share for 2022 to be above the 2021 level.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Affiliated Managers has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Affiliated Managers has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Affiliated Managers is part of the Zacks Financial - Investment Management industry. Over the past month, Federated Hermes (FHI - Free Report) , a stock from the same industry, has gained 0.5%. The company reported its results for the quarter ended June 2022 more than a month ago.

Federated Hermes reported revenues of $366.01 million in the last reported quarter, representing a year-over-year change of +17.7%. EPS of $0.74 for the same period compares with $0.67 a year ago.

Federated Hermes is expected to post earnings of $0.72 per share for the current quarter, representing a year-over-year change of -1.4%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.4%.

Federated Hermes has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.


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