On Jun 27, 2013, we reiterated our Neutral recommendation on Federated Investors, Inc. (FII), based on its significant growth potential in the long run given its fairly liquid balance sheet and diversified asset as well as product mix. However, persistent regulatory pressures, slow global economic growth and a low-interest rate environment are expected to keep earnings under pressure in the upcoming quarters.
After the evaluation of Federated’s expected continuing cash flow from operations, and its ability to obtain additional financing arrangements and issue debt or stock, we believe that the company will have sufficient liquidity to meet its present as well as reasonably foreseeable cash needs. Federated boasts a strong liquidity position with cash and other investments of $307 million at the end of first-quarter 2013.
Under the current pressure for money market funds owing to the lingering low interest-rate environment and tightening regulations, acquiring money market assets depict the company’s buoyancy in the money market business. Federated is looking forward to many such opportunities in order to provide cream services to its clients as it acquired more than $5 billion worth of money market assets in 2012.
However, Federated’s first-quarter 2013 earnings per share of 41 cents lagged the Zacks Consensus Estimate by a penny. Lower-than-expected results were driven by a decline in top line, aided by an increase in voluntary fee waivers.
Over the last 90 days, the Zacks Consensus Estimate for 2013 decreased 4.5% to $1.71 whereas for 2014 it declined by 1.6% to $1.87 per share. Currently, Federated carries a Zacks Rank #3 (Hold).
Investment Managers to be Consider
Some investment managers that are worth considering include Artisan Partners Asset Management Inc. (APAM), Virtus Investment Partners, Inc. (VRTS) and Noah Holdings Limited (NOAH). All 3 companies carry a Zacks Rank #1 (Strong Buy).
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