Affiliated Managers Beats on EPS

Zacks

Affiliated Managers Group, Inc.’s (AMG) fourth quarter 2012 economic net income (ENI) came in at $2.55 per share, beating the Zacks Consensus Estimate of $2.43. Moreover, this compared favorably with ENI of $1.76 recorded in the year-ago quarter.

Better-than-expected results were aided by growth in top line, which was offset by higher operating expenses to some extent. Moreover, continued improvement in asset under management (:AUM) and strong balance sheet were the other positives for the quarter.

Affiliated Managers Group’s ENI came in at $136.5 million, surging 47.6% from $92.5 million in the year-ago quarter.

For the full-year, the company’s ENI stood at $408.8 million or $7.71 per share compared with $351.0 million or $6.62 per share in 2011. Moreover, ENI compared favorably with the Zacks Consensus Estimate of $7.58 per share.

Behind the Headlines

Affiliated Managers Group’s total revenue augmented 22.0% year over year to $491.0 million. However, this missed the Zacks Consensus Estimate of $523.0 million by 6.5%. EBITDA was $182.1 million, rising 56.6% compared with $116.3 million in the prior quarter.

For the full-year, total revenue improved 5.9% year over year to $1.8 billion. However, it marginally lagged the Zacks Consensus Estimate of $1.9 billion

Total operating expenses jumped 18.5% year over year to $364.1 million. The rise was primarily due to a sizeable hike in total compensation and related expenses along with selling, general and administrative costs and other operating expenses.

Assets Under Management

Total AUM as of Dec 31, 2012, reached $431.8 billion, reflecting net client cash flows of $5.1 billion. This compared favorably with $416.1 billion recorded in the prior quarter.

As of Dec 31, 2012, mutual fund AUM stood at $121.9 billion, up 3.4% sequentially. Moreover, institutional AUM came in at $254.3 billion, up 4.3% sequentially. Further, high net worth AUM were $55.6 billion, up 1.9% sequentially.

Capital and Liquidity

As of Dec 31, 2012, Affiliated Managers Group had $430.4 million in cash and cash equivalents. Moreover, the company had $325.0 million as senior bank debt at the end of the quarter. Furthermore, the company had shareholder’s equity of $2.1 billion.

Our Viewpoint

Investment appreciation, along with the growing need for risk management and alternative investment solutions within the financial service industry, is expected to contribute positively to Affiliated Managers Group over the long term. Although the company posted good results in the quarter, the persistent sluggish economic recovery will continue to keep its financials under pressure in the near term.

Currently, Affiliated Managers Group retains a Zacks Rank #2 (Buy). Stocks of other asset managers that are performing well include Virtus Investment Partners, Inc. (VRTS), BlackRock, Inc. (BLK) and Cohen & Steers Inc. (CNS). Virtus carries a Zacks Rank #1 and the other two hold a Zacks Rank #2 (Buy).
 

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