A month has gone by since the last earnings report for Affiliated Managers Group, Inc. (AMG - Free Report) . Shares have lost about 4% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is AMG 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 drivers.
Affiliated Managers Q1 Earnings Top on Higher Revenues
Affiliated Managers reported first-quarter 2018 economic earnings of $3.92 per share, outpacing the Zacks Consensus Estimate of $3.88. Also, earnings were up 22.1% year over year.
Rise in revenues and growth in AUM from the prior-year quarter benefited the results. However, higher operating expenses and outflows were the undermining factors.
Affiliated Managers’ economic net income was $215.2 million, an increase of 17.5% from the prior-year quarter.
Revenues & Expenses Rise
Total revenues grew 12.5% year over year to $612.4 million. Also, the top line beat the Zacks Consensus Estimate of $592.4 million.
Earnings before interest, taxes, depreciation and amortization were $286.5 million, up 17.5% from the year-ago quarter.
Total operating expenses increased 11.2% year over year to $435.4 million. The rise was primarily due to increase in all components except interest expenses.
As of Mar 31, 2018, total AUM was $830.9 billion, up 10.3% year over year but down nearly 1% sequentially. The quarter also witnessed net client cash outflow of $1.9 billion.
Capital & Liquidity Position Decent
As of Mar 31, 2018, Affiliated Managers had $334.2 million in cash and cash equivalents compared with $439.5 million as of Dec 31, 2017. Notably, the company had $1.56 billion of senior bank debt, relatively stable with the Dec 31, 2017 level.
Shareholders’ equity as of Mar 31, 2018, totaled $3.68 billion, down from $3.82 billion as of Dec 31, 2017.
Share Repurchase Update
During the reported quarter, the company repurchased 0.8 million shares for $151 million.
Management expects economic earnings per share to be in the range of $16.50 to $18.50 in 2018 based on assumptions of market performance till Jan 26, 2018, 2% quarterly market growth beginning second-quarter 2018, performance fee contribution of 13% and share repurchase plan.
The company expects performance fees in second-quarter 2018 to be in the range of 5-15 cents per share.
Management expects total interest expenses to be nearly $21 million in second-quarter 2018, relatively stable sequentially and $80 million in 2018.
Further, the company expects amortization expenses to be nearly $41 million in second-quarter 2018, down from the prior quarter and $190 million in 2018.
In 2018, management expects GAAP tax rate to be 26%. Additionally, the cash tax rate is projected to be 21%.
Intangible-related deferred taxes are expected to be $12 million in the second quarter 2018.
Moreover, management expects the ratio of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) to average AUM for second-quarter 2018 to be nearly 12.1 basis points (bps) and for 2018 it is expected to be 14.1 bps.
Also, the company projects other economic items to be around $2 million per quarter.
Based on the expectations of increased cash flow and the pacing of new investments, the company plans to repurchase nearly $150 million worth shares in the second quarter 2018.
Further, the company expects weighted average share count of 54.4 million in the second quarter and 54.2 million in 2018.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been three revisions lower for the current quarter.
Affiliated Managers Group, Inc. Price and Consensus
At this time, AMG has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was also allocated a grade of B on the value side, putting it in the top 40% 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.
Based on our scores, the stock is equally suitable for value, growth and momentum investors.
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, AMG has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.