AMG Beats EPS Ests, Revenue Up

Zacks

Affiliated Managers Group, Inc.’s (AMG) third quarter 2012 economic net income (ENI) came in at $1.91 per share, marginally beating the Zacks Consensus Estimate of $1.88. Moreover, this compared favorably with ENI of $1.55 per share 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 an extent. Moreover, continued improvement in asset under management (:AUM) and strong balance sheet were the other positives for the quarter.

Affiliated Managers Group reported ENI of $101.2 million for the third quarter, rising substantially from $82.1 million in the year-ago quarter.

Behind the Headlines

Affiliated Managers Group’s total revenue augmented 12.9% year over year to $467.3 million. However, this missed the Zacks Consensus Estimate of $485.0 million by 3.6%. EBITDA was $133.5 million, compared with $112.9 million in the prior quarter.

Total operating expenses spiked 13.8% year over year to $327.6 million. The rise was primarily due to a sizeable hike in total compensation and related expenses along with selling, general and administrative costs.

Assets under Management

Total AUM as of September 30, 2012 was $416.1 billion, reflecting net client cash flows of $10.9 billion. This compared favorably with $384.6 billion recorded in the prior quarter.

As of September 30, 2012, mutual fund AUM stood at $117.9 billion, up 8.7% sequentially. Moreover, institutional AUM came in at $243.8 billion, up 8.9% sequentially. Further, high net worth AUM were $54.5 billion, up 4.2% sequentially.

Capital and Liquidity

As of September 30, 2012, Affiliated Managers Group had $372.6 million in cash and cash equivalents. Moreover, the company had $445 million as senior bank debt at the end of the quarter. Furthermore, the company had shareholder’s equity of $1.9 billion.

Our Viewpoint

Investment appreciation in Affiliated Managers Group, along with the growing need for risk management, and alternative investment solutions within the financial service industry are expected to contribute positively to the company over the long run. In spite of posting good results in the quarter, the persistent sluggish economic recovery will continue to keep the company’s financials under pressure in the near term.

Currently, Affiliated Managers Group retains a Zacks #2 Rank, which translates into a short-term Buy rating.

One of its peers, Oaktree Capital Group, LLC (OAK) is expected to announce its third-quarter results on November 5.

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