Schroders is set to report its annual earnings results for 2019 on 5 March. What might share price traders expect and what can be gauged from the firm’s H1 performance?
The share price of Schroders [SDR], the 200-year-old London-based asset management firm, saw solid gains in 2019, closing the year up 37% and beating the 12% gain made by the wider FTSE 100 by a large margin.
The uptick in share price was despite the company posting drab half-year results on 1 August. Pre-tax profits fell 14% from the same period in 2018 and net outflows from the fund sat at £1.2bn – while £7.2bn was pulled by investors in the first six months of 2019, just £3.2bn was paid in. That’s compared to a net inflow gain of £1.2bn for H1 2018.
Schroders, which is the UK’s fourth-largest of its type by global assets under management, blamed the lackluster results on a “relatively weak” performance by the stock market in the period, along with a “risk-off” environment among investors “predominantly driven by a lack of demand for Equity products”.
Despite the ascribed difficult market conditions and the resulting outflows, the value of the firm’s assets under management grew a respectable 9% through the period from the end of December 2018 to June 2019, taking the company to a new high of £444.4bn. This growth saw an uptick in share price too, moving 25% in the same period from a 5-year low in December 2018.
The results were also slightly ahead of analyst’s expectations, with a reported £340.4m in profits before tax and exceptional items narrowly beating the consensus estimate of £336.3m.
What’s happened since?
After making a moderate gain on the day of the H1 earnings release in August, Schroders’ share price plummeted 13% across the next 14 days. But by mid-September, the stock had more than regained the losses.
Schroders’ Q3 2019 update meanwhile saw a moderate increase of assets under management for the three months up to 30 September, taking the total to £450bn, a 10% increase from the start of the year.
Schroders’ share price continued its upward momentum after the 15 October update was released, a trend which continued (although at a more subdued level) as it entered 2020.
But across 24 and 25 February, Schroders’ share price plunged by 7.5% amid a wider market sell-off triggered by concerns surrounding the spread of the coronavirus and its possible impact on business travel.
Amount Schroder's price dropped due to coronavirus
The dive took the share price below its 200-day moving average while remaining above its 50-day moving average, suggesting the stock could have slipped into undervalued territory.
What to expect?
Considering the slip in price due to coronavirus concerns, the share price could be primed for a post-earnings bounce, particularly if the firm posts strong full-year results on Thursday.
This could, however, be hindered by the reporting of further outflows in the second half of 2019; data from Morningstar showed that with £1.2bn pulled from the company’s funds in November 2019, Schroders had the biggest net outflows of any UK fund that month, according to FT Adviser.
|PE ratio (TTM)||17.38|
|Quarterly Revenue Growth (YoY)||-7.80%|
Schroders share price vitals, Yahoo Finance, 04 March 2020
Analysts meanwhile expect the firm to report earnings per share of 194.6p according to Refinitiv, down from 211.8p in 2018. Despite this, things look bright for 2020. The firm expects to increase earnings by 8% through the coming year.
Schroders’ appealing dividend, which is expected to come in at 114p per share for the coming 2019 results (matching 2018) also looks in a solid position – it has been increased yearly over the past five years. Of 15 analysts tracked by Refinitiv, 12 rate Schroders’ share price a hold, while two rate it underperform and one rates the stock sell.