A month has gone by since the last earnings report for Ameriprise Financial Services, Inc. (NYSE:AMP) . Shares have added about 11.6% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it 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 catalysts.
Ameriprise Beats on Q4 Earnings as Expenses Decline
Ameriprise’s fourth-quarter 2016 operating earnings per share of $2.73 easily surpassed the Zacks Consensus Estimate of $2.43. Also, the figure represents a year-over-year increase of 11%.
The quarterly results came in better than expected, primarily due to a decline in expenses. Also, growth in assets under management (“AUM”) and assets under administration (“AUA”) were on the positive side. However, a fall in top line hurt the results to some extent.
After considering several significant items, net income attributable to shareholders for the reported quarter came in at $400 million or $2.46 per share, up from $357 million or $2.00 per share in the prior-year quarter.
For 2016, operating earnings (excluding unlocking) of $9.40 per share significantly outpaced the Zacks Consensus Estimate of $9.16. Moreover, it was 3% above the prior-year figure. After considering several significant items, net income attributable to shareholders was $1.31 billion, down 16% year over year.
Lower Costs Support Results as Revenues Fall
Net revenue (on a GAAP basis) for the quarter was $3.06 billion, down 1% from the year-ago quarter. However, the figure surpassed the Zacks Consensus Estimate of $2.98 billion.
For 2016, GAAP net revenue declined 4% year over year to $11.70 billion. Also, it was below the Zacks Consensus Estimate of $11.80 billion.
On an operating basis, total net revenue came in at $2.94 billion, a decline of 1% from prior-year quarter. This reflected strong net revenue growth in Advice & Wealth Management segment, which was partially offset by lower Asset Management revenues.
Operating expenses came in at $2.40 billion, down nearly 1% from the prior-year quarter. The decline was primarily due to fall in all expense components except distribution expenses and amortization of deferred acquisition costs.
Strong AUM & AUA
As of Dec 31, 2016, total AUM and AUA totaled $787.4 billion, up 1% year over year. Ameriprise’s advisor client net inflows and market appreciation were partially offset by the net outflows from Asset Management and the unfavorable impact of foreign exchange rates.
Share Repurchases
In the reported quarter, Ameriprise repurchased 3.8 million shares for $402 million.
Outlook
Management expects DOL expenses to remain stable sequentially in first-quarter 2017 as it prepares to implement the DOL regulation in April.
Further, as the company is moving toward a completely new account structure, the management projects that it will lead to the elimination of some of its 12b-1 fees, by first half of 2017.
Management expects margin expansion in the AWM segment to continue over time, assuming no significant market disruptions will take place. Also, margins in the AM segment are anticipated to improve to a range of 35–39%, as the company enters more normalized markets.
The company anticipates effective operating tax rate to be 24–25% in 2017.
Management expects to continue returning 90–100% of operating earnings to its shareholders in 2017.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one downward revision for the current quarter.
AMERIPRISE FINANCIAL SERVICES, INC. Price and Consensus
AMERIPRISE FINANCIAL SERVICES, INC. Price and Consensus | AMERIPRISE FINANCIAL SERVICES, INC. Quote
VGM Scores
At this time, Ameriprise’s stock has a poor Growth Score of 'F', however its Momentum is doing a lot better with a 'B'. Following the exact same course, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile 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.
Based on our styles scores, the stock is suitable for value and momentum investors.
Outlook
The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
AMERIPRISE FINANCIAL SERVICES, INC. (AMP): Free Stock Analysis Report
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