Federated Investors Inc.
) reported fourth-quarter 2011 earnings per share of 36 cents,
lagging the Zacks Consensus Estimate by 3 cents per share. The
earnings missed the prior quarter's earnings by a penny, and were
also below earnings of 45 cents reported in the year-ago
Results reflected a lower top-line growth and an increase in
voluntary fee waivers on a year-over-year basis. This was partly
offset by a rise in fixed income, equity and money market assets,
higher assets under management (AUM) and a decline in total
Net income in the quarter was $36.9 million, down from $38.3
million reported in the prior quarter and $46.4 million in the
For full year, net income was $150.9 million or $1.45 per share,
down from $179.1 million or $1.73 per share in the prior year. Full
year earnings per share were also below the Zacks Consensus
Estimate by 4 cents.
Performance in Detail
Total revenue inched up 1% sequentially to $216.4 million,
driven by an increase in money market and fixed-income assets,
partially offset by a fall in revenue related to changes in equity
asset mix. However, revenue declined 12% year over year (y/y),
owing to an increase in voluntary fee waivers coupled with change
in the mix of average equity assets. Yet, these decreases were
partly offset by a rise in revenue from increased average money
market and fixed-income assets. Moreover, the revenue reported was
below the Zacks Consensus Estimate of $225.0 million.
During the reported quarter, Federated derived 46% of its
revenue from money market assets, 53% from fluctuating assets (31%
from equity assets and 22% from fixed-income assets) and 1% from
other products and services.
For full year, total revenue was $895.1 million, down 6% year
over year. Also, the revenue missed the Zacks Consensus Estimate of
Total operating expenses climbed 5% sequentially to $154.5
million in the quarter, primarily reflecting higher distribution
and travel related fees. However, expenses plummeted 7% y/y, driven
by lower distribution and other expenses.
As of December 31, 2011, total AUM was $369.7 billion, up 5%
from $351.7 billion as of September 30, 2011 and up 3% from $358.2
billion reported as of December 31, 2010. Average managed assets
were $358.3 billion, up 3% from $348.8 billion in the prior quarter
and up 4% from $345.7 billion in the prior-year quarter.
At quarter end, fixed-income assets increased 4% sequentially
and 10% y/y to $44.8 billion. Equity assets came in at $30.9
billion, rising 10% sequentially and slightly up on a y/y basis.
Further, money market assets in both funds and separate accounts
climbed 5% sequentially and 3% y/y to $285.1 billion. Money market
mutual fund assets were $255.9 billion in the quarter, up 4%
sequentially and 5% y/y.
As of December 31, 2011, cash and other investments were $322.3
million, down from $333.6 million at the end of December 31, 2011.
Total long-term debt was $420.4 million, down from $445.5 million
at the end of December 31, 2011.
Share Repurchase and Dividend Update
In full year 2011, Federated repurchased 1.5 million shares of
Federated class B common stock for $28.1 million. During the fourth
quarter of 2011, Federated Investors purchased 0.6 million shares
of Federated Class B common stock worth $9 million.
Concurrent with the earnings release, the board of Federated
Investors declared a quarterly dividend of 24 cents per share. The
dividend will be paid on February 15, 2012 to shareholders of
record as of February 8, 2012.
We expect regulatory backdrop and sluggish global economic
growth to keep earnings under pressure. However, Federated has the
potential for substantial growth in the long run, given its fairly
healthy balance sheet and a diversified asset as well as product
mix. Nevertheless, the near-term outlook remains cautious and we
are expecting a strong and steady rebound, which will help to
increase market activity and regenerate client demand.
Among Federated's peers,
The Blackstone Group
) will report its fourth-quarter 2011 earnings on February 2,
Federated currently retains its Zacks #3 Rank, which translates
into a short-term 'Hold' rating. Considering the fundamentals, we
also maintain our "Neutral" recommendation on the stock.
BLACKSTONE GRP (
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FEDERATED INVST (
): Free Stock Analysis Report
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