Shares of investment manager
Fortress Investment Group LLC
) rallied 1.4% after it reported fourth-quarter 2013 pre-tax
distributable earnings of 24 cents per dividend paying share on
Feb 27. Results were well ahead of the Zacks Consensus Estimate
and year-ago figure of 20 cents.
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With this, Fortress Investment delivered positive earnings
surprises in 3 of the 4 quarters of 2013.
Impressive results were driven by increased revenues, lower
expenses, a strong balance sheet position and improved management
fee paying assets under management (AUM). However, the company
witnessed a decline in revenues under its Credit Hedge Fund
division and Logan Circle division.
On a GAAP basis, net income surged 43% year over year to $318
million in the reported quarter. Also, for 2013, it significantly
rose to $484 million from the year-ago figure of $219 million.
For the full-year 2013, pre-tax distributable earnings were 88
cents per share, up 69% year over year. This also outpaced the
Zacks Consensus Estimate of 70 cents per share.
Total revenue increased $566 million in the reported quarter from
$418 million in the prior-year quarter. It also surpassed the
Zacks Consensus Estimate of $239 million.
For 2013, total revenue rose 30% year over year to $1,265
million. Further, it beat the Zacks Consensus Estimate of $914
Other income declined 72% year over year to $19 million.
Operating expenses declined 4% from the prior-year quarter to
$243 million. This was mainly due to fall in interest expenses
and employee compensation expenses.
As of Dec 31, 2013, management fee paying AUM increased 16% year
over year to $61.8 billion.
As of Dec 31, 2013, total uncalled capital came in at $7.1
billion, which is available for common investment purposes.
As of Dec 31, 2013, cash and cash equivalents were $364.6
million, compared with $104.2 million as of Dec 31, 2012.
Notably, there was no debt obligation outstanding in the quarter.
Capital Deployment Activities
Along with the earnings release, Fortress Investment declared
fourth-quarter cash dividend of 8 cents per Class A share,
representing a 33% increase from its previous pay. The dividend
will be paid on Mar 14 to shareholders of record on Mar 11.
Further, subsequent to the year-end, the company repurchased
around 60.6 million dividend-paying shares at a price of $6.00
per share, representing around 12% of dividend-paying shares
According to the latest annual filling, Fortress Investment
reported $3.7 million paper loss in its pilot investment in the
virtual currency - Bitcoin. Notably, the investment reflects less
than 1% of the $2.6 billion balance sheet of the company.
The company failed to make successful investments at a time when
the digital currency is facing a setback owing to a dearth of
adequate technology and absence of credible regulations.
Performance of Other Investment Managers
Among other investment management firms,
The Blackstone Group L.P.
) beat the Zacks Consensus Estimate in their latest earnings
releases. Results benefited from top-line growth, partially
offset by higher expenses. Further, all three companies recorded
impressive AUM growth.
Results of Fortress Investment Group reflects a decent
performance throughout the year. Further company's consistent
organic growth, expense management and a strong balance sheet are
impressive. However, current macroeconomic headwinds across the
industry remain a concern.