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Why Is SEI Investments (SEIC) Down 5.3% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for SEI Investments Company (SEIC - Free Report) . Shares have lost about 5.3% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is SEIC 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.

SEI Investments Beats on Q1 Earnings, AUM Improves

SEI Investments’ first-quarter 2018 earnings of 86 cents per share surpassed the Zacks Consensus Estimate of 77 cents. Also, the figure compared favorably with the prior-year quarter earnings of 55 cents.

An increase in total revenues, partly offset by higher operating expenses, aided the company’s results during the reported quarter. Moreover, growth in AUM remained strong.

Net income for the quarter was $139.8 million, increasing 57.6% from the year-ago period.

Revenues and AUM Improve, Expenses Rise

Total revenues for the quarter were $405.6 million, increasing 12.7% year over year. The rise reflected an increase in asset management, administration and distribution fees as well as information processing and software servicing fees. The figure lagged the Zacks Consensus Estimate of 412 million.

Total expenses during the quarter were $289.3 million, increasing 8.6% year over year. The rise was due to higher compensation, benefits and other personnel costs, subadvisory, distribution and other asset management costs, consulting, outsourcing and professional fees, data processing and computer-related fees along with facilities, supplies and other costs.

Operating income increased 24.4% year over year to $116.3 million.

As of Mar 31, 2018, AUM was $334.71 billion, reflecting an increase of 12.7% from the prior-year quarter. Total client AUM was $530.11 billion, increasing 10.9% year over year. Note that client AUM does not include $9.7 billion related to Funds of Funds assets that were reported on Mar 31, 2018.

Share Repurchase

In the reported quarter, SEI Investments bought back 1.1 million shares for $82.3 million.

Outlook

The company expects to recognize about $20.1 million as stock-based compensation costs in 2018.

Management anticipates capital expenditures excluding capitalized software to be nearly $37 million in 2018.

Effective tax rate is expected to be in the range of 20-22% in 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been three revisions lower for the current quarter.

VGM Scores

At this time, SEIC has a strong Growth Score of A, though it is lagging a lot on the momentum front with a C. The stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than momentum investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, SEIC has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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