We have reiterated our Neutral recommendation on
Janus Capital Group Inc.
) based on the company's better expense management and healthy
capital position. However, declining performance fees is a matter
COHEN&STRS INC (CNS): Free Stock Analysis
JANUS CAP GRP (JNS): Free Stock Analysis Report
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The early retirement of debt strengthened the balance sheet, which
paved the way for Janus Capital's Board of Directors to increase
the regular quarterly cash dividend by 20% in the first quarter of
2012. Such actions would boost investors' confidence in the
Janus Capital has been striving hard to strengthen its businesses.
The company is currently focused on enhancing its fixed income
business including trading and investment. It ended 2011 with more
than $20 billion in fixed income AUM for the first time in the
history of the company. We expect these measures to aid its
top-line expansion in the upcoming quarters.
Janus Capital continues to improve its operating leverage by
enhancing its organic growth in addition to focusing on reducing
expenses and strengthening both fixed and discretionary cost
savings. We expect the company's strategy of achieving growth with
operating leverage to boost both the top and bottom-line results
and provide a greater foundation to the company's operations in the
On the flip side, majority of the company's total assets are in
equities, which makes it more vulnerable to the volatilities of the
equity market. The performance of fundamental equity funds has been
volatile over the past few quarters due to fluctuation in sales, as
well as overall redemptions. Moreover, outflows increased
significantly to $1.9 billion during the first quarter of 2012
compared with $0.5 billion in the previous year, primarily driven
by underperformance of fundamental equity and lower demand for
active equity strategies. These outflows will affect the company's
financials through lower performance fees, thereby hampering
Nevertheless, given its healthy balance sheet and dividend
increment, we believe Janus has the potential to outperform its
peer group in the long run. The risk-reward profile of Janus
Capital is currently balanced and hence, we have reiterated our
Neutral recommendation on its shares.
Janus Capital currently retains its Zacks #3 Rank, which translates
into a short-term Hold rating. The company's peer -
Cohen & Steers Inc.
) also retains a Zacks #3 Rank.