Shares of Affiliated Managers Group Inc. ( AMG ) fell nearly 1.1% on Tuesday, in spite of reporting upbeat second-quarter 2014 results before the opening bell. Economic earnings of $2.65 per share surpassed the Zacks Consensus Estimate of $2.59. This also compared favorably with economic earnings of $2.18 in the year-ago quarter.
Our quantitative model had also conclusively projected that Affiliated Managers would beat the Zacks Consensus Estimate, as it had the right combination of two key components - a positive Earnings ESP and a Zacks Rank #2 (Buy).
Better-than-expected results were attributable to a rise in revenues, although partly offset by higher operating expenses. Additionally, improvement in assets under management (AUM) and a strong balance sheet acted as tailwinds.
Affiliated Managers' economic net income was $149.8 million, up 24% year over year.
Affiliated Managers' total revenue increased 18% from the prior-year quarter to $636.3 million. Moreover, it was above the Zacks Consensus Estimate of $634.0 million.
Earnings before interest, taxes, depreciation and amortization (EBITDA) were $211.9 million, rising 22% from the year-ago quarter.
Total operating expenses rose 15% year over year to $399.1 million. This was primarily due to a rise in all operating expense components, except intangible amortization and impairments charges.
As of Jun 30, 2014, total AUM was $606.8 billion, up from $300.6 billion as of Dec 31, 2013. This reflected net client cash flow of $13.9 billion.
Capital and Liquidity
As of Jun 30, 2014, Affiliated Managers had $374.2 million in cash and cash equivalents as compared with $469.6 million as of Dec 31, 2013. Moreover, the company had $300.0 million of senior bank debt at the quarter-end versus $525.0 million as of Dec 31, 2013.
Furthermore, shareholders' equity came in at $2.5 billion, up from $2.1 billion as of Dec 31, 2013.
Affiliated Managers is expected to benefit from increased investments in the near term. Moreover, the growing demand for risk management and alternative investment solutions within the financial service industry will likely be accretive to the company's financials going forward.
However, a slow economic recovery, high debt levels in Affiliated Managers' balance sheet and rising expenses are expected to keep the company's financials under pressure.
Performance of Other Asset Managers
The Blackstone Group L.P. ( BX ), BlackRock, Inc. ( BLK ) and Janus Capital Group Inc. ( JNS ) outpaced the Zacks Consensus Estimate in their latest earnings releases. The results were driven by improvement in top line, partially offset by higher expenses. Also, all three recorded impressive AUM growth.
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