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Restructuring, AUM Growth Aids Ameriprise (AMP) Amid Cost Woes

Ameriprise Financial’s AMP robust assets under management (AUM) balance and business-restructuring initiatives are expected to support top-line growth. Given a solid balance sheet, the company’s capital distributions seem sustainable, through which it will likely enhance shareholder value.

However, significant outflows in the company’s Asset Management (AM) segment, along with steadily rising expenses, are expected to hurt the bottom line to some extent.

The Zacks Consensus Estimate for AMP’s current-year earnings has been revised 1.8% lower over the past 60 days, indicating that analysts are not optimistic regarding its earnings growth potential. Thus, the company currently carries a Zacks Rank #3 (Hold).

Over the past six months, shares of Ameriprise have gained 13.7% compared with the industry’s rally of 13.9%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Looking at its fundamentals, the company’s net revenues (GAAP basis) witnessed a compound annual growth rate (CAGR) of 2.7% over the four-year period (ended 2022). The upward momentum continued in the first nine months of 2023. AMP constantly modifies its product and service-offering capability to keep pace with dynamic market needs. This strategy, along with asset growth, has helped it record a rise in the top line.

The company’s efforts to launch products are likely to keep supporting net revenue growth in the quarters ahead. We project GAAP net revenues to grow 8.4%, 3.7% and 2.5% in 2023, 2024 and 2025, respectively.

Moreover, Ameriprise has grown inorganically and restructured its business from time to time to remain profitable by focusing on its core operations. The acquisition of BMO Financial Group’s EMEA asset management operations in 2021 bolstered AMP’s wealth and asset management businesses and supported its global diversification efforts. In 2019, Ameriprise divested the Ameriprise Auto & Home business.

The above-mentioned initiatives are expected to further support revenue growth.

We remain encouraged by Ameriprise’s impressive capital distribution activities. In April 2023, it announced a dividend hike for the 16th time since 2010. It also has a share repurchase plan in place. In July 2023, its board of directors authorized an additional $3.5 billion worth of repurchase plan through Sep 30, 2025. In January 2022, a buyback program worth $3 billion (expiring on Mar 31, 2024) was authorized. As of Sep 30, 2023, the company had $3.6 billion worth of shares left to be repurchased under the plans.

However, the company’s AM segment, which is one of the major sources of revenues (accounting for 21.3% of total adjusted operating net revenues in the first nine months of 2023), has been witnessing outflows. The weakness is expected to persist in the quarters ahead, given the tough operating backdrop. This will likely adversely impact the segment’s top-line performance.

While AMP’s GAAP expenses declined in 2020, the metric witnessed a CAGR of 1.7% over the four-year period ended 2022. The uptrend continued in the first nine months of 2023. The company’s initiatives to focus on cost management have resulted in controlled general and administrative expenses, but overall costs are expected to remain elevated due to advertising campaigns, hiring, inflation and technology upgrades. This year, we expect GAAP expenses to rise 6.9% year over year.

Stocks to Consider

A couple of better-ranked stocks from the finance space are Prospect Capital Corporation PSEC and First Citizens BancShares, Inc. FCNCA.

Earnings estimates for PSEC have been revised 8.1% upward for the current fiscal year over the past 60 days. The company’s share price has decreased 2.7% over the past three months. PSEC currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

First Citizens BancShares currently carries a Zacks Rank #2 (Buy). Its earnings estimates have been revised upward by 3.9% for the current year over the past 60 days. In the past three months, FCNCA’s share price has increased 5.1%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Ameriprise Financial, Inc. (AMP) : Free Stock Analysis Report

First Citizens BancShares, Inc. (FCNCA) : Free Stock Analysis Report

Prospect Capital Corporation (PSEC) : Free Stock Analysis Report

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Zacks Investment Research