Yes you are right. That was market appreciation offset by continued outflows. January was a big up month for the stock market (biggest start to the year since 1987 or something). That does help a business like this a lot. I think the market performance going forward will be hard to predict. But outflows will continue almost assuredly.
A fascinating stat is that outflows in equities have been more than $200B over the last 3 years. There are only $130B of equity assets left!
The other thing to consider here is the company is losing high fee AUM -- in equities, and gaining lower fee AUM -- in fixed income. So today's AUM is less profitable than yesterdays.
This kind of analysis ignores the operating leverage in the business (i.e. incremental margins are very high in this business).
The reason AB had only 7% adjusted operating margins in Q4 is because money is leaving, and they can't cut compensation and SG&A fast enough.
Eventually over the long term, you are right -- they will hack the place up enough to restore margins. But what will AUM be then?
Although it is not a precise calculation because quite a bit goes into the final earnings number, an historical ratio of $distribution to AUM will give you a sense of what the future distribution will be.
As an example, the January AUM was higher than the Q4 average AUM and if it continues to increase, or even hold at the current $421B the Q1 distribution should be in the $.23 range. The average AUM for Q3 was $438B with a $.26 distribution.
Thanks. I realize that the distribution goes up and down with earnings/cash flow each quarter. My point is that the current true run rate of earnings/cash flow is really down to only about $0.12/qtr...I don't think that number was artificially depressed by one-offs...but let me know if you think otherwise. AB will cut a bunch of costs to try and get margins up, but its tough.
You cannot extrapolate the $.12 to every quarter. Check the past distribution history. As an LP the distribution depends on earnings/cash flow each quarter. You need to recalculate. Good luck with your investing. You might also "google" limited partnerships to learn more about this asset class.
The new quarterly distribution is $0.12. This is what it will likely be, all else being equal, going forward, as last quarter the company earned only $0.07 after adjusting for all the charges etc. Earnings are so low because the big negative operating leverage the business has when assets leave.
I'm guessing the company will cut a lot of costs (heads) so that will help earnings, but assets will continue to leave as well.
$0.12*4 = $0.48/yr. At the current price, this is only a 3.5% yield.
Similarly on earnings, as distributions and earnings are roughly the same, the company is currently trading at 25-30x where earnings estimates for the year will be revised to. Clearly, this is a rich valuation.
In my opinion, a great chance to get out of the stock for those that own it.
A lot of "noise" in the numbers. I expected the $587 Million non-cash charge but not the full charge ($159.9 Million)for the December Unit awards. see below:
"During the quarter, the Company recorded a $587 million one-time, non-cash charge for all unrecognized deferred incentive compensation on outstanding awards from prior years. Operating expenses, including the charge, were $1.2 billion for the fourth quarter, a year-over-year increase of 87%. In addition, the Company recorded 100% of the expense associated with its 2011 deferred incentive compensation awards of $159.9 million."