On Monday, RBC Capital made adjustments to its outlook on Schroders Plc (LON:SDR:LN) (OTC: SHNWF) shares, a prominent asset management firm, by reducing the price target to GBP3.65 from the previous GBP3.75. The firm maintained its Sector Perform rating on the stock. The revision comes as Schroders faces headwinds despite favorable equity market conditions that have bolstered assets under management (AUM).
The analyst from RBC Capital noted that the first half of 2024 (1H24) presented challenges for Schroders. Although rising equity markets provided some support to AUM, net flows likely worsened, with expectations now set for a decline of GBP0.7 billion compared to a gain of GBP5.7 billion in the first half of 2023 (1H23). This anticipated deterioration in net flows has prompted the adjustment in the price target.
Further to the net flow concerns, RBC Capital also revised down its expectations for Schroders' management fee margin, particularly within Schroders Capital, due to a slowdown in real estate transactions. As a result, the firm's forecast for Schroders' operating profits for the fiscal years 2024 to 2026 has been lowered by 2-3%.
Despite these downward revisions, RBC Capital's projections for the first half of 2024 are still generally aligned with the Visible Alpha consensus regarding net flows and operating profit for Schroders. The adjustment in the price target reflects the challenges identified, with the new target set at 365p, a slight decrease from the previous target of 375p.
In other recent news, Schroders Plc has experienced a change in analyst ratings and price targets. UBS upgraded Schroders stock from Neutral to Buy, citing the current valuation levels as an attractive risk-reward balance for investors.
The investment firm also set a new price target for Schroders at GBP4.30. This upgrade follows Schroders' stock performance lagging behind its peers and broader market indices this year, with the company's shares falling by 9% year-to-date.
On the other hand, RBC Capital adjusted its outlook on Schroders by reducing its price target slightly from £3.80 to £3.75, while maintaining a Sector Perform rating on the stock.
This adjustment was prompted by the company's first-quarter asset under management (AUM) figures, which fell short of RBC Capital's expectations by 4%. As a result, RBC Capital revised its adjusted operating profit forecasts for Schroders for the fiscal years 2024 through 2026, decreasing them by 1% for each year.
These are recent developments that investors should consider when evaluating Schroders' financial performance and market valuation. The contrasting views from UBS and RBC Capital highlight the different perspectives on the asset management firm's future performance.
InvestingPro Insights
In light of the recent analysis by RBC Capital on Schroders Plc, real-time data and insights from InvestingPro provide a valuable perspective on the company's financial health and future prospects. With a market capitalization of $7.7 billion and a solid track record of dividend reliability, Schroders has raised its dividend for three consecutive years and has maintained dividend payments for 33 consecutive years. These InvestingPro Tips underscore the firm's commitment to shareholder returns, even amidst sales decline concerns for the current year.
InvestingPro Data further reveals a Price/Earnings (P/E) Ratio of 15.47, which adjusts to a more favorable 11.44 when looking at the last twelve months as of Q4 2023, indicating a potentially undervalued stock. Additionally, the company's Gross Profit Margin stands at an impressive 79.84% for the same period, reflecting efficient operations and a strong ability to generate income from its revenues.
These metrics, coupled with the prediction that Schroders will remain profitable this year, as per InvestingPro Tips, suggest a resilient business model. For readers interested in deeper analysis, there are additional InvestingPro Tips available for Schroders at https://www.investing.com/pro/SHNWF. To access these insights, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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