It has been about a month since the last earnings report for SEI Investments (SEIC). Shares have lost about 3.4% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is SEI due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
SEI Investments Lags on Q1 Earnings as Costs Increase
SEI Investments’ first-quarter 2019 earnings of 73 cents per share lagged the Zacks Consensus Estimate of 76 cents. The figure reflected a decline of 15.1% from the prior-year quarter.
Results were primarily hurt by a decline in revenues along with higher expenses. Moreover, lower assets under management were a concern.
Net income was $114 million, down from $139.8 million recorded in the year-ago period.
Revenues & AUM Decline, Expenses Rise
Total revenues were $400.8 million, down 1.2% year over year. This decline reflected lower information processing and software servicing fees along with lower asset management, administration and distribution fees. The figure missed the Zacks Consensus Estimate of $403.2 million.
Total expenses during the reported quarter were $297.3 million, up 2.8% year over year. This rise was due to an increase in almost all components, except for stock-based compensation, software royalties and other information processing costs, and subadvisory, distribution and other asset management costs.
Operating income declined 11% year over year to $103.6 million.
As of Mar 31, 2019, AUM was $331.7 billion, reflecting a decline of nearly 1% from the prior-year quarter. Client assets under administration (AUA) were $608.9 billion, increasing 14.9% year over year. Note that client AUA does not include $11.4 billion related to Funds of Funds assets that were reported on Mar 31, 2019.
In the reported quarter, SEI Investments bought back 1.7 million shares for $88.8 million.
The company expects to recognize about $22.6 million as stock-based compensation costs in 2019, down from $23.8 million recorded in 2018.
Going forward, management anticipates capital expenditure of nearly $57 million (including nearly $41 million related to facility expansion).
Effective tax rate is expected to be roughly 21% in 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, SEI has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise SEI has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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