Affiliated Managers (AMG) Beats On Q1 Earnings, Costs Rise

Affiliated Managers Group Inc. (NYSE:AMG) reported first-quarter 2017 economic earnings of $3.21 per share, outpacing the Zacks Consensus Estimate of $3.17. Also, earnings were up 9.9% year over year.

The quarter witnessed strong growth in assets under management (AUM). However, marginally lower revenues along with elevated expenses were the headwinds.

Affiliated Managers’ economic net income (ENI (MI:ENI)) was $183.2 million, an increase of 15% from the prior-year quarter.

Revenues Down, Expenses Rise

Total revenue declined marginally year over year to $544.3 million. Also, the top line missed the Zacks Consensus Estimate of $550.7 million.

Earnings before interest, taxes, depreciation and amortization (EBITDA) were $243.8 million, up 13% from the year-ago quarter.

Total operating expenses increased marginally year over year to $367.7 million. The rise was primarily due to an increase in compensation and related expenses.

As of Mar 31, 2017, total AUM grew 17.4% year over year to $753.5 billion. The quarter witnessed net client cash outflow of $1.3 billion.

Capital Position Deteriorated, Liquidity Position Decent

As of Mar 31, 2017, Affiliated Managers had $293.6 million in cash and cash equivalents compared with $430.8 million as of Dec 31, 2016. Notably, the company had $783.7 million of senior bank debt compared with $868.6 million as of Dec 31, 2016.

Shareholders’ equity as of Mar 31, 2017, totaled $3.58 billion, down from $3.62 billion as of Dec 31, 2016.

Share Repurchases

During the reported quarter, the company repurchased $80 million worth of common stock.

Our Take

Affiliated Managers remains well positioned for future growth based on successful partnerships and global distribution capability, along with a diverse product mix. Also, a strong balance sheet position helped it initiate dividend payments, which should boost investors’ confidence in the stock.

However, we remain concerned about the impact of increased debt levels and higher intangibles on its near-term profitability.

Currently, Affiliated Managers carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Asset Managers

Janus Capital Group, Inc.’s (NYSE:JNS) first-quarter 2017 adjusted earnings per share of 23 cents surpassed the Zacks Consensus Estimate of 21 cents. Better-than-expected results were driven by an increase in revenues. However, rise in operating expenses was a concern.

BlackRock, Inc. (NYSE:BLK) reported first-quarter 2017 adjusted earnings of $5.25 per share, which handily beat the Zacks Consensus Estimate of $4.94. The better-than-expected result was largely driven by an improvement in revenues, partially offset by an increase in expenses.

Lazard Ltd.’s (NYSE:LAZ) first-quarter 2017 adjusted earnings of 83 cents per share surpassed the Zacks Consensus Estimate by 3 cents. The reported figure compared favorably with 50 cents earned in the prior-year quarter. Earnings were primarily driven by higher revenues.

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