Shares of the UK-based Schroders PLC (GB:SDR) plummeted after the company reported a net outflow of £2.3 billion for the third quarter. The higher outflows were mainly due to increased market volatility in China. Meanwhile, AUM (assets under management) reached a new high of £777.4 billion but remained almost flat compared to the previous quarter.
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After the Q3 update, SDR stock dropped nearly 14%, making it the top faller on the FTSE 100 index at the time of writing. Year-to-date, shares have lost 27% in trading.
Schroders specializes in investment management, asset management, advisory, and wealth management services.
Schroders Warns of Tough Quarter Ahead
Moving ahead, Schroders stated that it expects a challenging fourth quarter, with approximately £10 billion in withdrawals expected from four departing clients. This includes £8 billion from legacy client Scottish Widows impacting its Solutions segment, along with an additional £2 billion in withdrawals from three institutional clients.
The company is feeling the pinch of higher competition from low-cost tracker funds offered by industry giants and rising operational costs.
Analysts React to Schroders’ Q3 Update
J.P. Morgan analysts called Schroders’ Q3 update “disappointing.” They further stated that the fund flows were notably below expectations and the expected outflows could exert pressure on management fee margins. Additionally, analysts believe this could result in consensus EPS (earnings per share) downgrades in the high single digits for 2024-25, unless a more positive outlook on costs is shared by the company.
Meanwhile, analysts at RBC Capital Markets noted that the outflows have contributed to ongoing negative sentiment about Schroders. However, the company has not yet quantified the impact on its margins.
What is Schroders Share Price Target?
According to TipRanks consensus, SDR stock has been rated a Moderate Buy based on four Buys, five holds, and one Sell recommendation. The Schroders share price target is 394.56p, which is 26.2% above the current price level.
