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SEI (SEIC) Down 3.9% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for SEI Investments (SEIC). Shares have lost about 3.9% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important catalysts.

SEI Investments Q2 Earnings Lag Estimates, AUM Declines

SEI Investments’ second-quarter 2020 earnings of 68 cents per share lagged the Zacks Consensus Estimate of 69 cents. Moreover, the figure reflects a decline of 17.1% from the prior-year quarter.

Results were primarily hurt by a rise in expenses and lower revenues. Moreover, a decline in AUM was a headwind.

Net income was $101.1 million, down 20.1% from the year-ago quarter.

Revenues & AUM Decline, Expenses Rise

Total revenues were $400.6 million, down 2.2% year over year. The fall reflected a decline in both components of revenues. Moreover, the reported figure lagged the Zacks Consensus Estimate of $403.2 million.

Total expenses were $300.3 million, up 3.8% year over year. The rise was due to an increase in stock-based compensation costs, consulting, outsourcing and professional fees, data processing and computer-related costs, amortization expenses, and depreciation costs.

Operating income declined 16.5% year over year to $100.3 million.

As of Jun 30, 2020, AUM was $317.8 billion, reflecting a decline of 5.2% from the prior-year quarter. Client assets under administration (AUA) were $692.5 billion, up 9.8% year over year. Note that client AUA does not include $11.3 billion related to Funds of Funds assets that were reported on Jun 30, 2020.

Share Repurchases

In the reported quarter, SEI Investments bought back 1.6 million shares for $89.5 million.

Outlook

In 2020, management expects remaining capital expenditure, excluding capitalized software, of $16 million, which includes $9 million related to the facility expansion.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, SEI has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. It comes with little surprise SEI has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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