On Sep 24, 2013, we reaffirmed our Neutral recommendation on
Federated Investors, Inc.
), 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
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 $303
million at the end of second-quarter 2013.
We view Federated as a sound asset for yield-seeking investors
based on its capital deployment activities. In Jul 2013,
Federated declared a 4% hike in its quarterly dividend. Based on
its competitive financial performance and earnings, Federated is
on track to fulfill its commitment of returning shareholders'
However, Federated's second-quarter 2013 earnings per share of 39
cents lagged the Zacks Consensus Estimate by a penny. This also
compares unfavorably with the prior-quarter earnings of $0.41,
though it came in line with the year-ago quarter.
Lower-than-expected results were driven by a decline in the top
line due to an increase in voluntary fee waivers.
Over the last 60 days, the Zacks Consensus Estimate for 2013
decreased 4.9% to $1.56 whereas for 2014 it declined by 1.7% to
$1.75 per share. Currently, Federated carries a Zacks Rank #3
Investment Managers to Consider
Some investment managers that are worth considering include
GAMCO Investors, Inc.
) with a Zacks Rank #1 (Strong Buy), while
Artisan Partners Asset Management Inc.
Noah Holdings Limited
) carry a Zacks Rank #2 (Buy).
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