Affiliated Managers (AMG) Q2 Earnings Beat On Lower Costs

Affiliated Managers Group Inc. (NYSE:AMG) reported second-quarter 2016 economic earnings of $3.06 per share, which outpaced the Zacks Consensus Estimate of $3.01. However, earnings were down nearly 1% year over year.

Results reflected a decrease in operating expenses, partially offset by a fall in revenues. Notably, growth in assets under management ("AUM") led by marginal net inflows acted as a tailwind.

Affiliated Managers’ economic net income was $166.5 million, down 3% from the prior-year quarter.

Revenue Slump Offset by Lower Expenses

Total revenue fell 14% year over year to $554.1 million. Also, the top line lagged the Zacks Consensus Estimate of $558.5 million.

Earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $220.3 million, declining 8% from the year-ago quarter.

Total operating expenses fell 18% year over year to $372.3 million. The fall was mainly due to a reduction in selling, general and administrative costs.

As of Jun 30, 2016, total AUM inched up roughly 1% from the prior-year quarter to $647.6 billion. This reflected a net client cash inflow of $0.6 billion.

Strong Capital & Liquidity Position

As of Jun 30, 2016, Affiliated Managers had $360.4 million in cash and cash equivalents compared with $563.8 million as of Dec 31, 2015. Moreover, the company had $898.4 million of senior bank debt at the quarter end compared with $643.3 million as of Dec 31, 2015.

Shareholders’ equity as of Jun 30, 2016, totaled $2.91 billion, up from $2.84 billion as of Dec 31, 2015.

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, the company’s consistent investments in new affiliates and initiatives undertaken to strengthen retail market operations are expected to work in its favor going forward.

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).

Performance of Other Asset Managers

BlackRock, Inc. (NYSE:BLK) reported second-quarter 2016 adjusted earnings of $4.78 per share, which lagged the Zacks Consensus Estimate by a penny. Lower-than-expected results primarily depicted a decline in revenues. However, efficient cost containment was on the positive side.

Waddell & Reed Financial Inc. (NYSE:WDR) reported second-quarter 2016 adjusted earnings of 59 cents per share, surpassing the Zacks Consensus Estimate of 48 cents. Better-than-expected results were primarily driven by lower expenses. However, a decline in revenues, elevated outflows and deterioration in AUM were the undermining factors.

Invesco Ltd. (NYSE:IVZ) reported second-quarter 2016 adjusted earnings of 56 cents per share, beating the Zacks Consensus Estimate by a penny. Decline in operating expenses largely benefited the results. Further, long-term net outflows acted as a tailwind. However, soft revenues as well as weakness in AUM were the undermining factors.