On Tuesday, Deutsche Bank (ETR:DBKGn) kept its Buy rating on Affiliated Managers Group (NYSE:NYSE:AMG) stock but reduced the price target to $204.00 from a previous target.
The firm's analysis highlighted mixed third-quarter results for the company, with economic earnings per share (EPS) of $4.82 falling short of the consensus estimate of $4.83 and the firm's own forecast of $4.84. However, they considered the "core" economic EPS to be around $4.87 after accounting for an economic loss and a lower-than-expected tax rate.
The adjusted EBITDA for Affiliated Managers Group missed Deutsche Bank's estimates due to a slightly lower EBITDA revenue realization rate. This was partly attributed to lower performance fees of $5 million, which were below management's guidance of $10 million.
While average assets under management (AUM) were slightly better than forecasted, the company experienced outflows of $2.8 billion, which was a more negative result than Deutsche Bank's anticipated inflows of $0.3 billion and was close to the consensus estimate of $2.7 billion in outflows.
During the earnings call, management conveyed a positive outlook for private markets and liquid alternatives, as well as continued success in the wealth channel. Affiliated Managers Group has grown its alternative assets on the wealth platform to $5 billion, up from $1 billion three years ago, and saw over $0.5 billion in net inflows in this channel during the last quarter.
Despite these positive indicators, the company now expects lower performance fees for 2024, falling below the long-term average outlook of $150 million due to some strategies underperforming. Management also anticipates some softness in reaching the $150 million target for performance fees in 2025.
On the positive side, management confirmed they are on track to repurchase $700 million of shares this year, supported by a strong balance sheet. Additionally, the pipeline for new affiliate investments remains robust.
Deutsche Bank's revised price target reflects a more cautious stance on the company's organic growth and performance fee outlook.
In other recent news, Affiliated Managers Group, Inc. (AMG) reported an 18% increase in economic earnings per share in its third-quarter 2024 earnings call, reaching $4.82, bolstered by strategic capital allocation and an expansion in alternative strategies.
The company's assets under management (AUM) have soared to approximately $730 billion, the highest in over two years, with alternative investments playing a significant role in earnings. The firm anticipates continued growth with adjusted EBITDA projections for Q4 ranging between $260 million and $270 million and economic earnings per share expected to be between $5.94 and $6.17.
AMG also highlighted its most significant share repurchase program to date, buying back $103 million in shares in Q3 and aiming for approximately $700 million in repurchases for 2024.
Despite anticipating lower performance fees for 2024, AMG expects to maintain a strong balance sheet and capital flexibility for future investments and shareholder returns.
The company has a robust pipeline of investment opportunities and is well-positioned for future growth. However, performance fees for the full year are expected to fall below the historical average due to underperformance in some absolute return strategies.
On a bullish note, AMG is optimistic about its competitive position and ability to execute its growth strategy, particularly in private markets and liquid alternatives. These are the recent developments for AMG.
InvestingPro Insights
To complement Deutsche Bank's analysis, recent data from InvestingPro sheds additional light on Affiliated Managers Group's (NYSE:AMG) financial position and market performance. The company's market capitalization stands at $5.28 billion, with a P/E ratio of 12.4, indicating a potentially attractive valuation relative to earnings.
An InvestingPro Tip highlights that management has been aggressively buying back shares, aligning with the company's reported plan to repurchase $700 million of shares this year. This strategy often signals management's confidence in the company's value and can potentially boost earnings per share.
Despite the recent reduction in Deutsche Bank's price target, AMG's stock has shown strong performance, with a 38.39% total return over the past year. This robust performance is further supported by another InvestingPro Tip noting AMG's strong return over the last five years, suggesting a pattern of long-term value creation for shareholders.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for AMG, providing deeper insights into the company's financial health and market position.
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