Affiliated Managers Q4 Earnings Beat on Top-Line Growth
Affiliated Managers Group Inc.’s (AMG) fourth-quarter 2013 economic net income (ENI) came in at $3.66 per share, which easily beat the Zacks Consensus Estimate of $3.09. The reported figure also compared favorably with ENI of $2.55 recorded in the year-ago quarter.
Better-than-expected results were aided by top-line growth, partially offset by higher operating expenses. Further, continued improvement in asset under management (:AUM) and a strong balance sheet were the tailwinds.
Affiliated Managers’ ENI came in at $202.9 million, rising 49% year over year.
For full-year 2013, the company reported ENI of $10.31 per share, substantially above the Zacks Consensus Estimate of $9.74. Further, ENI compared favorably with $7.71 in the previous year.
Behind the Headlines
Affiliated Managers’ total revenue increased 21.0% year over year to $594.0 million. However, it lagged the Zacks Consensus Estimate of $637.0 million. Earnings before interest, taxes, depreciation and amortization (:EBITDA) were $301.5 million, rising 66% from $182.1 million in the year-earlier quarter.
For 2013, total revenue was $2.19 billion, marginally missing the Zacks Consensus Estimate of $2.23 billion. Nevertheless, revenues were up 21% on a year-over-year basis.
Total operating expenses climbed 21% year over year to $440.9 million. A rise in all operating expense components except for depreciation and other amortization costs as well as other expenses was the primarily reason for the increase.
Assets under Management
As of Dec 31, 2013, total AUM was $537.3 billion, reflecting net client cash flow of $40.7 billion. This compared favorably with $431.8 billion as of Dec 31, 2012.
As of Dec 31, 2013, mutual fund AUM was $169.4 billion, up 39% year over year. Moreover, institutional AUM came in at $300.6 billion, increasing 18% year over year. Further, high net worth AUM were $67.3 billion, rising 21% from the prior-year quarter.
Capital and Liquidity
As of Dec 31, 2013, Affiliated Managers had $469.6 million in cash and cash equivalents compared with $430.4 million as of Dec 31, 2012. Moreover, the company had $525.0 million of senior bank debt at the quarter-end as against $325.0 million as of Dec 30, 2012.
Furthermore, the company had shareholders’ equity of $2.1 billion, which remained relatively unchanged from Dec 31, 2012.
Performance of Other Asset Managers
Among other asset managers, The Blackstone Group L.P. (BX), BlackRock, Inc. (BLK) and Invesco Ltd. (IVZ) reported better-than-expected fourth-quarter earnings. Results benefited from a rise in the top line, partially offset by higher expenses. Further, all three companies recorded impressive AUM growth.
Our Viewpoint
Affiliated Managers is expected to benefit from increased investments in the near term. Moreover, the growing need for risk management and alternative investment solutions within the financial service industry will likely be accretive to the company’s financials going forward.
However, a slow economic recovery, high debt levels in Affiliated Managers’ balance sheet and rising expenses are expected to keep the company’s financials under pressure.
Affiliated Managers currently carries a Zacks Rank #2 (Buy).
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