Federated Investors Inc.
) reported third-quarter 2013 earnings per share of 38 cents,
inching past the Zacks Consensus Estimate by a penny. However,
this compares unfavorably with the prior-year quarter earnings of
Improved assets under management (AUM) and a strong capital
position were the positives for the quarter. However, decline in
the top line and elevated level of operating expenses remains
Including certain non-recurring items, net income for the quarter
under review came in at $37.7 million or 36 cents per share
compared with $55.8 million or 54 cents per share in the
Performance in Detail
Total revenue decreased 11% year over year to $211.9 million. The
reported revenues were also below the Zacks Consensus Estimate of
$223.0 million. The decline was due to an upsurge in voluntary
fee waivers, partially offset by enhanced average equity assets.
Moreover, net investment advisory fees recorded a fall of 16%
year over year and stood at $134.6 million.
During the reported quarter, Federated derived 36% of its
revenues from money market assets, 62% from fluctuating assets
(39% from equity assets and 23% from fixed-income assets) and the
remaining 2% from other products and services.
Total operating expenses surged 4% on a year-over-year basis to
$154.1 million in the quarter. The rise in expenses primarily
reflects increased professional services fees, partially
mitigated by lower distribution costs.
As of Sep 30, 2013, total AUM was $366.7 billion, up 1% from
$364.1 billion as of Sep 30, 2012. Average managed assets were
$364.2 billion, up 1% from $361.1 billion in the prior-year
At quarter end, fixed-income assets declined 3% year over year to
record $50 billion. Equity assets came in at $40.3 billion, up
14% year over year.
Money market mutual fund assets came in at $237.9 billion, down
3% year over year. Money market assets in both funds and separate
accounts were $270.3 billion, slightly up on a year-over-year
As of Sep 30, 2013, cash and other investments were $350.5
million, up from $258.6 million as of Dec 31, 2012. Total
long-term debt was $366.5 million, down from $405.0 million as of
Dec 31, 2012.
Capital Deployment Update
In third-quarter 2013, Federated repurchased 60,100 shares of
Federated class B common stock for $1.7 million.
Concurrent with the earnings release, the board of Federated
declared a quarterly dividend of 25 cents per share. The dividend
will be paid on Nov 15, 2013 to shareholders of record as of Nov
Among other investment managers,
Janus Capital Group Inc.
) third-quarter 2013 earnings were in line with the Zacks
Consensus Estimate, while results at
T. Rowe Price Group, Inc.
) beat the Zacks Consensus Estimate.
We believe Federated has the potential for significant growth in
the long run, given its fairly liquid balance sheet and a
diversified asset as well as product mix. Moreover, investors'
increased demand for the company's wide range of income-oriented
products will aid top-line improvement. Further, capital
deployment activities will augur well.
However, persistent regulatory pressures, slow global economic
growth and a low-interest rate environment are expected to keep
Federated's earnings under pressure in the upcoming quarters.
Shares of Federated currently carry a Zacks Rank #3 (Hold).
FEDERATED INVST (FII): Free Stock Analysis
JANUS CAP GRP (JNS): Free Stock Analysis
LAZARD LTD (LAZ): Free Stock Analysis Report
T ROWE PRICE (TROW): Free Stock Analysis
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