On Apr 2, 2013, we reiterated our Neutral recommendation on
Federated Investors, Inc.
) based on its improving top line. However, escalating operating
expenses was the downside.
Federated's fourth-quarter earnings of 48 cents per share
surpassed the Zacks Consensus Estimate as well as the
prior-quarter earnings. Results were aided by top-line growth as
a result of decline in voluntary fee waivers. Moreover, a rise in
total assets under management, primarily driven by escalated
fixed income assets, was a positive in the quarter. Yet, results
were partially affected by elevated operating expenses.
Over the last 60 days, the Zacks Consensus Estimate for 2013
remained stable whereas for 2014 it declined by only 2%. As a
result, Federated carries a Zacks Rank #3 (Hold).
Moreover, the company's leading position as a fund manager in the
U.S and a diverse business mix are long-term growth drivers.
Further, a strong liquidity position and the ability to make
opportunistic acquisitions are positives for the stock. Extensive
capital deployment activities also continue to reinforce
investors' confidence in the stock.
However, the volatile regulatory landscape is expected to be a
headwind in the near future. Further, we remain concerned about
the regulations governing the money market funds, which might
significantly impact Federated's money market fund business. In
addition, the decline in fee waivers is expected to continue till
mid-2015, which may temper the company's profitability in the
near to mid term.
Other Banks Worth Considering
Other banks that are performing better than Federated include
Meta Financial Group, Inc.
Flagstar Bancorp Inc.
First Defiance Financial Corp.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
META FINL GRP (CASH): Free Stock Analysis
FLAGSTAR BANCP (FBC): Free Stock Analysis
FIRST DEFIANCE (FDEF): Free Stock Analysis
FEDERATED INVST (FII): Free Stock Analysis
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