Following the third-quarter 2014 earnings release, shares of Affiliated Managers Group Inc. (AMG) declined more than 3.3%. The fall came on growing concerns over persistent rise in operating expenses, in spite of reporting upbeat results before the opening bell.
Economic earnings of $2.76 per share surpassed the Zacks Consensus Estimate of $2.71. This was also 26% above the economic earnings of $2.19 earned in the year-ago quarter.
Better-than-expected results were attributable to strong revenue growth, although partly offset by a rise in operating expenses. Also, improvement in assets under management (AUM) and a strong balance sheet acted as tailwinds.
Affiliated Managers’ economic net income was $156.8 million, up 29% year over year.
Detailed Performance
Total revenue grew 16% from the prior-year quarter to $640.3 million. However, it was below the Zacks Consensus Estimate of $659.0 million.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were $218.1 million, rising 28% from the year-ago quarter.
Total operating expenses increased 9% year over year to $416.1 million. This was primarily due to a rise in all operating expense components, except intangible amortization and impairment charges.
As of Sep 30, 2014, total AUM was $599.5 billion, up from $537.3 billion as of Dec 31, 2013. This reflected a net client cash flow of $18.8 billion.
Capital and Liquidity
As of Sep 30, 2014, Affiliated Managers had $560.2 million in cash and cash equivalents as compared with $469.6 million as of Dec 31, 2013. Moreover, the company had $250.0 million of senior bank debt at the quarter-end versus $525.0 million as of Dec 31, 2013.
Furthermore, shareholders’ equity came in at $2.6 billion, up from $2.1 billion as of Dec 31, 2013.
Our Viewpoint
Affiliated Managers is expected to benefit from increased investments in the near term. Moreover, growing demand for risk management and alternative investment solutions within the financial service industry will likely be accretive to the company’s financials going forward.
However, a slow economic recovery, high debt levels in Affiliated Managers’ balance sheet and rising expenses are anticipated to keep the company’s financials under pressure.
Currently, Affiliated Managers carries a Zacks Rank #3 (Hold).
Performance of Other Asset Managers
Invesco Ltd. (IVZ), BlackRock, Inc. (BLK) and Lazard Ltd. (LAZ) outpaced the Zacks Consensus Estimate in their respective latest earnings releases. Results were driven by an improvement in top line, partially offset by higher expenses. Also, all three companies recorded impressive AUM growth.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment