On March 18, 2014, we issued an updated research report on New York based investment management firm Federated Investors, Inc. (FII). The company recently reported impressive fourth-quarter 2013 results. Lower operating expenses and a strong liquidity position were partially offset by a decline in the top line and a marginal fall in assets under management (AUM).
On Jan 30, Federated came out with earnings per share of 39 cents, outpacing the Zacks Consensus Estimate by 8.3%. With this, the company delivered positive earnings surprises in 2 quarters, while it missed in the remaining 2 quarters of 2013.
Federated has consistently exhibited efforts in strengthening its global presence over the last few years through strategic deals. Recently, in order to strengthen services in Chile, the company inked a deal with RJ Delta Fund Management to acquire its marketing services.
Further, recently, Federated and Huntington Asset Advisors, Inc., a unit of Huntington Bancshares, Inc. (HBAN) inked a deal under which Federated will acquire the latter’s fixed-income assets worth $421 million. Increased assets under management will help Federated cater to its clients with various new fund offerings that would be beneficial at a time when the money market fund managers are under pressure due to the lingering low interest rate environment and increasing number of regulations.
Federated’s efforts in enhancing shareholder value through its efficient capital deployment activities are commendable. Notably, in 2013, the company paid $102.5 million as cash dividends while it repurchased 0.6 million shares of common stock for $14.2 million.
Though Federated exhibits decent fundamentals, we remain cautious due to the current economic uncertainty across the industry. These include volatile equity markets, the ongoing fee waiving trend in money market fund to maintain positive or zero net yields and the prevailing stringent regulatory landscape.
Further, the Zacks Consensus Estimate over the past 60 days declined 1.2% to $1.64 per share for 2014. Also, for 2015, it declined 1% to $1.93 per share.
Federated currently carries a Zacks Rank #3 (Hold).
Stocks That Warrant a Look in the Sector
Fortress Investment Group LLC (FIG) and Lazard Ltd. (LAZ) are better-ranked stocks in this space. Both the stocks hold a Zacks Rank #1 (Strong Buy).
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