AMG Earnings: Outflows Offset Market Gains as Firm Looks to Recover From Market Dislocation
There was little in narrow-moat Affiliated Managers Group’s AMG first-quarter results that would alter our long-term view of the firm. We expect to leave our $145 fair value estimate in place and view the shares as fairly valued.
AMG closed the March quarter with $668 billion in managed assets, up 2.6% sequentially but down 14.0% year over year. This was only slightly better than our forecast for $667 billion in assets under management. The firm did do a better job on the flow front, generating $3.2 billion in outflows during the first quarter relative to our expectation for $4.7 billion. This was also significantly better than the $9.4 billion quarterly run rate for outflows that AMG experienced the past three years.
Given the ongoing weakness of AMG’s global equity performance, with just 56% and 36% of AUM outperforming their benchmarks on a three- and five-year basis, respectively, at the end of March, we expect the company to continue to face flow headwinds in that part of its business. The segment’s $5.1 billion in outflows during the first quarter accounted for the majority of AMG’s outflows.
With average AUM down 16.1% year over year during the March quarter, AMG reported a 14.8% decline in revenue compared with the prior-year period, despite a slightly more favorable mix shift and a modest level of performance fee income. That said, we still envision top-line growth being down low single digits for the full year as the company starts to lap its most difficult quarters from 2022.
First-quarter adjusted operating margin (by our calculations) of 32.4% was 740 basis points lower year over year, well below our projected range of 36%-40% for 2023, but things should improve some as we get through the rest of the year. AMG reported first-quarter economic earnings per share of $4.18, above the FactSet consensus of $4.16 but in line with our own estimate.
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