Janus Capital Group Inc.
) reported third quarter 2012 earnings per share attributable to
common shareholders of 15 cents, in line with the Zacks Consensus
Estimate as well as the year-ago quarter's earnings. Including an
intangible asset impairment charge of 1 cent per share related to
the redemption of a sub-advised account, earnings stood at 14
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Lower top-line growth and net outflows were the negatives for the
quarter. However, decline in operating expenses reflect better
Net income attributable to common shareholders stood at $25.1
million compared with $27.4 million in the prior-year quarter.
Performance in Detail
Total revenue plunged 11.8% year over year to $209 million in the
quarter. The year-over-year decline reflects negative performance
fees driven by underperformance of certain mutual funds along
with lower investment management fees. However, the revenue
figure surpassed the Zacks Consensus Estimate of $206.0 million.
Total operating expenses decreased 1.0% year over year to $161.1
million. The decline was mainly driven by lower distribution
expenses and reduced employee compensation and benefits expenses.
Operating margin was 22.9% compared with 31.3% in the year-ago
As of September 30, 2012, Janus Capital reported assets under
management (AUM) of $158.2 billion, up from $141.0 billion as of
September 30, 2011. Average AUM decreased slightly on a
year-over-year basis to $155.5 billion.
The increase in overall assets mainly reflects net market
appreciation of $7.8 billion, partially offset by long-term net
outflows of $2.0 billion. Long-term net inflows at fixed income
and mathematical equity totaled $1.0 billion and $0.3 billion,
respectively, partially offset by fundamental equity long-term
net outflows of $3.3 billion.
As of September 30, 2012, Janus Capital had stockholders' equity
of $1.4 billion, cash and investments of $683.6 million and
outstanding debt of $542.8 million.
Cash flows from operations were $75.3 million compared with $47.8
million in the prior-year quarter.
Capital Deployment Activity
During the third quarter of 2012, Janus Capital repurchased
773,300 shares of its common stock at an average price of $8.12
per share and at a total cost of $6.3 million.
Recently, Janus Capital's Board of Directors declared a regular
quarterly cash dividend of 6 cents per share. The dividend will
be paid on November 19, 2012 to shareholders of record as of
November 5, 2012.
Janus Capital faces increasing competition from its peers,
Fortress Investment Group LLC
Federated Investors Inc.
). The company has the best-in-class investment boutique with the
potential for AUM and revenue along with competitive leverage
growth. However, weakness in flows remains a matter of concern.
Though the fixed income segment and global operations are showing
signs of improvement, the company's equity-heavy portfolio makes
it vulnerable to the volatilities of the equity market. Further,
a low interest rate environment will likely affect the money
market business. Nevertheless, given its healthy balance sheet,
we believe Janus Capital has the potential to perform well in the
Shares of Janus Capital currently retain a Zacks #2 Rank, which
translates into a short-term Buy rating. However, considering the
fundamentals, we maintain a 'Neutral' recommendation on the