Ameriprise's AMP robust assets under management (AUM) balance and business restructuring initiatives are likely to keep aiding financials. Supported by a solid liquidity position, the company is expected to continue with efficient capital deployment activities, thus enhancing shareholder value.
However, significant outflows in AMP’s Asset Management segment make us apprehensive. Moreover, steadily rising expenses are expected to hurt the bottom line to some extent.
Looking at its financials, the company’s net revenues (GAAP basis) witnessed a compound annual growth rate (CAGR) of 2.7% over the last five years (2018-2022). The momentum continued in the first quarter of 2023. AMP’s efforts to launch products are likely to keep supporting top-line growth in the quarters ahead. We project GAAP net revenues to grow at the rate of 10.5%, 7.3% and 4.3% 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.
In November 2021, the company closed the deal to take over BMO Financial Group’s EMEA asset management operations, which are likely to bolster its wealth and asset management businesses and global diversification efforts. In 2019, Ameriprise divested the Ameriprise Auto & Home business. These initiatives are expected to further support revenue growth.
In April 2023, Ameriprise announced a dividend hike for the 16th time since 2010. In January 2022, its board of directors authorized an additional repurchase plan worth $3 billion (expiring on Mar 31, 2024). As of Mar 31, 2022, the company had $1.1 billion worth of shares left to be repurchased. Given its strong balance sheet position, it is expected to sustain efficient capital deployments.
However, analysts seem pessimistic regarding AMP’s earnings growth prospects. The Zacks Consensus Estimate for the company's 2023 earnings has been revised marginally lower over the past 30 days. The company currently carries a Zacks Rank #3 (Hold).
Over the past year, shares of Ameriprise have gained 16.6% compared with the industry’s rise of 4.7%.
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The company’s Asset Management segment, which remains one of the major sources of revenues (accounting for 21.6% of total adjusted operating net revenues in the first quarter of 2023), has been witnessing significant outflows. While the segment witnessed overall net inflows in 2020 and 2021, outflows are expected to continue in the quarters ahead amid a tough operating backdrop. This will likely continue to adversely impact the segment’s performance.
Further, while AMP's GAAP expenses declined in 2020, the same increased, witnessing a CAGR of 1.7% over the five-year period ended 2022. The uptrend persisted in the first quarter of 2023. Although the company’s initiatives to focus on cost management have resulted in controlled general and administrative expenses, overall costs are expected to remain elevated in the near term due to advertising campaigns, inflation, hiring and technology upgrades. Our estimates for GAAP expenses indicate a CAGR of 10.6% over the next three years.
Finance Stocks Worth a Look
A couple of better-ranked stocks from the finance space are Pathward Financial, Inc. CASH and First Citizens BancShares FCNCA.
The Zacks Consensus Estimate for Pathward Financial’s current-year earnings has been revised 1.8% upward over the past 30 days. Its shares have gained 3.6% in the past six months. Currently, CASH carries a Zacks Rank #2 (Buy).
First Citizens BancShares currently sports a Zacks Rank #1 (Strong Buy). Earnings estimates for 2023 have been revised 67% upward over the past 30 days. In the past six months, FCNCA’s shares have rallied 62.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
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