Federated Investors Inc. ( FII ) reported
first-quarter 2013 earnings per share of 41 cents, lagging the
Zacks Consensus Estimate by a penny. This also compares unfavorably
with the prior quarter's earnings of 44 cents, though it came in
line with the year-ago quarter.FRANKLIN RESOUR (BEN): Free Stock Analysis
ReportFEDERATED INVST (FII): Free Stock Analysis
ReportINVESCO LTD (IVZ): Free Stock Analysis ReportLEGG MASON INC (LM): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment
Lower-than-expected results were driven by decline in top line,
aided by an increase in voluntary fee waivers. However, a rise in
fixed income and equity assets were the positives. Moreover,
decreased operating expenses reflect prudent expense
Net income for the quarter under review came in at $43 million
compared with $50 million in the prior quarter and $42 million in
the prior-year quarter.
Performance in Detail
Total revenue dipped 1% year over year and 7% sequentially to $228
million. The reported revenues were also below the Zacks Consensus
Estimate of $254 million.
The year-over-year decline was due to an upsurge in voluntary fee
waivers, partially offset by enhanced average fixed-income and
equity assets. Moreover, the sequential decrease reflected a rise
in voluntary fee waivers along with lesser days in the quarter,
partially mitigated by increased average assets.
During the reported quarter, Federated derived 43% of its revenues
from money market assets, 56% from fluctuating assets (33% from
equity assets and 23% from fixed-income assets) and the remaining
1% from other products and services.
Total operating expenses declined slightly on a year-over-year
basis and dipped 1% sequentially to $160 million in the quarter.
The decline in expenses primarily reflects lower distribution costs
and decreased travel and related expenses.
As of Mar 31, 2013, total AUM was $377.3 billion, up 4% from
$363.6 billion as of Mar 31, 2012 but down 1% from $379.8 billion
as of Dec 31, 2012. Average managed assets were $381.2 billion, up
3% from $370.1 billion in the prior-year quarter and up 3% from
$368.7 billion in the prior quarter.
At quarter end, fixed-income assets improved 14% year over year
and slightly on a sequential basis to record $52.8 billion. Equity
assets came in at $37.9 billion, rising 11% year over year and 8%
However, money market mutual fund assets came in at $242.7
billion, down 1% year over year and 5% sequentially. Money market
assets in both funds and separate accounts were $279.7 billion,
down 2% both year over year and sequentially.
As of Mar 31, 2013, cash and other investments were $307 million,
up from $259 million as of Dec 31, 2012. Total long-term debt was
$401.0 million, down from $405 million as of Dec 31, 2012.
Capital Deployment Update
In first-quarter 2013, Federated repurchased 131,472 shares of
Federated class B common stock for $2.7 million.
Concurrent with the earnings release, the board of Federated
declared a quarterly dividend of 24 cents per share. The dividend
will be paid on May 15, 2013 to shareholders of record as of May 8,
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.
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). Among
other investment managers, Invesco Ltd. ( IVZ ), Legg
Mason Inc. ( LM ) and
Franklin Resources Inc. ( BEN ) are scheduled to
release March quarter-end earnings on Apr 30.