Federated Investors Inc.
) reported fourth quarter 2012 earnings per share of 48 cents,
marching ahead of the Zacks Consensus Estimate by 8 cents. The
earnings also compared favorably with the prior-year quarter's
earnings of 36 cents, though it was below the prior quarter's
earnings of 54 cents.
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Better-than-expected results were driven by higher top-line
growth, aided by decline in voluntary fee waivers. Moreover, a
rise in total assets under management, primarily driven by
escalated fixed income assets were the positives for the quarter.
Yet, results were partially impacted by elevated operating
Including reduction in earnings per share due to the use of the
two-class method of computing related with the special dividend
paid in the fourth quarter, net income came in at $49.6 million
or 44 cents per share.
For full year 2012, net income was $188.1 million or $1.79 per
share, up from $150.9 million or $1.45 per share in the prior
year. Full year earnings per share surpassed the Zacks Consensus
Estimate by 6 cents.
Performance in Detail
Total revenue climbed 13% year over year and 3% sequentially to
$244.8 million. The year-over-year upsurge was driven by a
decline in voluntary fee waivers and enhanced fixed-income and
equity assets. Moreover, the sequential uptick reflected an
increase in total average assets. Yet, the reported revenues were
below the Zacks Consensus Estimate of $252 million.
For full year 2012, total revenue was $945.7 million, up 6% year
over year. However, the revenues missed the Zacks Consensus
Estimate of $975.0 million.
During the reported quarter, Federated derived 47% of its
revenues from money market assets, 52% from fluctuating assets
(30% from equity assets and 22% from fixed-income assets) and the
remaining 1% from other products and services.
Total operating expenses jumped 5% year over year and 9%
sequentially to $161.6 million in the quarter. The rise in
expenses primarily reflects higher distribution costs and
increased travel and related expenses.
As of Dec 31, 2012, total AUM was $379.8 billion, up 3% from
$369.7 billion as of Dec 31, 2011 and up 4% from $364.1 billion
as of Sep 30, 2012. Average managed assets were $368.7 billion,
up 3% from $358.3 billion in the prior-year quarter and up 2%
from $361.1 billion in the prior quarter.
At quarter end, fixed-income assets improved 18% year over year
and 3% sequentially to record $52.7 billion. Equity assets came
in at $35 billion, rising 13% year over year, but down slightly
on a sequential basis.
However, money market mutual fund assets were $255.7 billion,
marginally down on a year-over-year basis, but up 4%
sequentially. Money market assets in both funds and separate
accounts were $284.7 billion, slightly down on a year-over-year
basis, but up 6% sequentially.
As of Dec 31, 2012, cash and other investments were $258.6
million, down from $322.3 million as of Dec 31, 2011. Total
long-term debt was $405.0 million, down from $429.2 million as of
Dec 31, 2011.
Capital Deployment Update
For full year 2012, Federated repurchased 321,687 shares of
Federated class B common stock for $6.3 million. Notably, in the
fourth quarter, the company repurchased 50,000 shares of
Federated class B common stock for $1.0 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 Feb 15, 2013 to shareholders of record as of Feb
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 help it bolster profitability.
However, persistent regulatory pressures, slow global economic
growth and a low-interest rate environment is expected keep
Federated's earnings under pressure in the upcoming quarters.
Shares of Federated currently carry a Zacks Rank #3 (Hold).
The Blackstone Group LP
) are expected to release fourth quarter earnings on Jan 31,
Franklin Resources Inc.
) will report fiscal first quarter 2013 results on Feb 1.