Maintaining its impressive earnings surprise streak, Ameriprise Financial Inc. (AMP) delivered a positive earnings surprise of 4.5% in the second quarter of 2014. Operating earnings per share of $2.08 surpassed the Zacks Consensus Estimate of $1.99. Moreover, the figure escalated 23.1% from the prior-year quarter.
Consistent improvement in top line on the back of strong performance across all segments is the key reason for the solid results. Moreover, assets under management (AUM) and assets under administration reflected sturdy growth. However, higher expenses still remained a headwind in the quarter.
After taking into consideration integration and restructuring charges, market impact on variable annuity guaranteed benefits, index universal life benefits and net realized gains/losses, Ameriprise’s net income from continuing operations came in at $374 million or $1.91 per share compared with $322 million or $1.54 per share in the year-ago quarter.
Behind the Headlines
On an operating basis, net revenue rose 6.5% year over year to $2.9 billion. Further, it was in line with the Zacks Consensus Estimate.
Operating expenses climbed 3.8% year over year to $2.3 billion. The increase was primarily owing to a rise in distribution expenses, general and administrative costs as well as interest and debt expenses. However, it was partly offset by a decline in amortization of deferred acquisition costs and fixed accounts interest.
As of Jun 30, 2014, total AUM and assets under administration totaled $810 billion, rising 15% year over year. The growth was mainly driven by market appreciation and advisor client net inflows.
Capital Deployment Activities
In the reported quarter, Ameriprise repurchased 3.2 million shares for $352 million. The company also returned $112 million to its shareholders as quarterly dividends. The dividend of 58 cents per common share will be paid on Aug 22 to shareholders of record as of Aug 11.
Our Viewpoint
Ameriprise’s focus on growth is reflected in its strong quarterly results. Also, given the relatively strong equity market along with the company’s steady AUM growth, we expect sustained top-line improvement. Moreover, the company’s continued capital deployment activities should act favorably.
However, Ameriprise’s mounting expenses amid a still low interest rate scenario and intense competition keep us apprehensive.
At present, Ameriprise has a Zacks Rank #2 (Buy).
Performance of Other Investment Managers
Among other investment management firms, The Blackstone Group L.P. (BX), BlackRock, Inc. (BLK) and T. Rowe Price Group, Inc. (TROW) beat the Zacks Consensus Estimate in their latest earnings releases. The results of these companies were driven by top-line growth, partially offset by elevated expenses. Moreover, all three companies recorded robust AUM growth.
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