Ameriprise Lags on Higher Expenses - Analyst Blog
October 27 2011 - 8:45AM
Zacks
Ameriprise Financial Inc.’s (AMP) third quarter
2011 operating earnings of $1.04 per share significantly missed the
Zacks Consensus Estimate of $1.22 and also compared unfavorably
with the year-ago quarter’s earnings of $1.35 per share.
Operating results exclude the consolidation of certain
investment entities, net realized gains or losses, integration and
restructuring charges, market impact on variable annuity guaranteed
living benefits and discontinued operations.
Net income attributable to Ameriprise for the reported quarter
came in at $271 million or $1.12 per share compared with $346
million or $1.33 per share in the comparable quarter last year.
Ameriprise’s third quarter results primarily benefited from
increased asset-based fees and impressive results at Asset
Management and Advice & Wealth Management segments. However,
higher expenses and decrease in asset under management formed the
downside.
Quarterly Details
On an operating basis, Ameriprise’s net revenues for the third
quarter rose 8% year over year to $2.52 billion, reflecting
substantial growth in management and distribution fees. However,
net revenues stood below the Zacks Consensus Estimate of $2.59
billion.
GAAP expenses in the quarter climbed 17.0% year over year to
$2.22 billion, while operating expenses escalated 20% from the
year-ago quarter to $2.2 billion. These represent significant
increase in distribution expenses and general and administrative
expenses, partially offset by lower benefits, claims, losses and
settlement costs.
Asset Position
Total assets under management and administration fell 4% year
over year to $600 billion as of September 30, 2011, primarily due
to decline in equity markets and Asset Management segment net
outflows, partially mitigated by retail client net inflows.
Share Repurchase
During the third quarter, Ameriprise repurchased 9.9 million
shares of its common stock for $447 million. Through September 30,
2011, the company repurchased $1.2 billion of shares and still has
$1.7 billion available in its share repurchase authorization that
expires in June 2013.
Peer Performance
One of Ameriprise’s competitors, BlackRock Inc.
(BLK) reported third quarter adjusted earnings of $2.83 per share,
fairly ahead of the Zacks Consensus Estimate of $2.74, primarily
aided by an improved top line, which was offset partially by higher
operating expenses.
Our Viewpoint
Though there is concern over the sluggish market recovery,
improvement in retail client activity as well as decent growth in
Advice & Wealth Management and Asset Management businesses
would drive operating leverage in the upcoming quarters.
Furthermore, Ameriprise’s capital deployment activity would also
boost investors’ confidence in the stock.
Ameriprise currently retains a Zacks # 3 Rank, which translates
into a short-term ‘Hold’ rating. Also, considering the
fundamentals, we maintain our long-term “Neutral” recommendation on
the stock.
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