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Affiliated Managers (AMG) Up 2.8% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Affiliated Managers Group (AMG - Free Report) . Shares have added about 2.8% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Affiliated Managers due for a pullback? 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 Beat, Revenues Fall

Affiliated Managers’ first-quarter 2020 economic earnings of $3.16 per share surpassed the Zacks Consensus Estimate of $3.14. However, the bottom line declined 3.1% year over year.

The results reflect lower operating expenses and a robust liquidity position. However, lower revenues, fall in assets under management (AUM) balance and decline in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were the undermining factors.

Economic net income was $151.3 million, down 10.5% from the prior-year quarter.

Revenues & AUM Down, Expenses Fall

Total revenues fell 6.6% year over year to $507.3 million. However, the top line beat the Zacks Consensus Estimate of $483.7 million.

Adjusted EBITDA was $200.4 million, down 7.1% from the year-ago quarter.

Total expenses decreased 8.6% from the prior-year quarter to $354.3 million. Decline in compensation and related expenses, selling, general and administrative costs, and intangible amortization and impairments primarily led to the fall.

As of Mar 31, 2020, total AUM was $599.9 billion, down 22.5% year over year. Net client cash outflows of $13.8 billion hurt AUM.

Capital & Liquidity Position Decent

As of Mar 31, 2020, Affiliated Managers had $592.2 million in cash and cash equivalents compared with $539.6 million as of Dec 31, 2019. The company had $2 billion of debt, up 14% from the Dec 31, 2019 level.

Shareholders’ equity as of Dec 31, 2019 was $3 billion, up from $2.9 billion on Dec 31, 2019.

Share Repurchase Updates

During the first quarter, the company repurchased shares worth $70 million. Moreover, through 2020, it intends to reallocate $50 million capital toward buybacks in place of dividend payments.

Second-Quarter 2020 Outlook

Management expects adjusted EBITDA of $160 million. Performance fee is anticipated to be $3 million, lower sequentially owing to seasonality.

Interest expenses are expected to be $22 million, suggesting 10% increase from the prior quarter level. The company’s share of reported amortization and impairments are expected to be $55 million.

Adjusted weighted average share count is estimated to be $47 million.

GAAP tax rate is expected to be 25%. Additionally, cash tax rate is expected to be 18%.

Intangible-related deferred taxes are expected to be $6 million. Other economic items are anticipated to be $1 million.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Affiliated Managers has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was 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 C. 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 this revision 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.


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