Affiliated Managers Group Inc. (NYSE:AMG) reported third-quarter 2016 economic earnings of $3.02 per share, outpacing the Zacks Consensus Estimate of $3.00. Also, earnings were up 3% year over year.
Better-than-expected results were driven by a decrease in operating expenses. Further, growth in assets under management ("AUM"), led by net inflows acted as a tailwind. However, lower revenue was an undermining factor.
Affiliated Managers’ economic net income was $164.5 million, an increase of 3% from the prior-year quarter.
Revenue Slump Offset by Fall in Expenses
Total revenue fell 11% year over year to $544.7 million. Also, the top line missed the Zacks Consensus Estimate of $570.6 million.
Earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $219.8 million, marginally up from $218.9 million in the year-ago quarter.
Total operating expenses declined 6% year over year to $373.7 million. The fall was mainly due to a reduction in selling, general and administrative costs.
As of Sep 30, 2016, total AUM grew 13% from the prior-year quarter to $672.4 billion. This reflected a net client cash inflow of $5.8 billion.
Strong Capital & Liquidity Position
As of Sep 30, 2016, Affiliated Managers had $422 million in cash and cash equivalents compared with $563.8 million as of Dec 31, 2015. Moreover, the company had $873.5 million of senior bank debt at quarter end compared with $643.3 million as of Dec 31, 2015.
Shareholders’ equity as of Sep 30, 2016, totaled $3.19 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). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Asset Managers
BlackRock, Inc. (NYSE:BLK) reported third-quarter 2016 adjusted earnings of $5.14 per share, which handily surpassed the Zacks Consensus Estimate of $5.05. Earnings were better-than-expected primarily due to a decline in total expenses. However, lower revenues acted as a headwind.
Waddell & Reed Financial Inc. (NYSE:WDR) reported third-quarter 2016 adjusted earnings of 64 cents per share, surpassing the Zacks Consensus Estimate of 51 cents. Better-than-expected results were primarily driven by lower expenses. A decline in revenues, elevated outflows and lower AUM were the other undermining factors.
Ameriprise Financial Inc.’s (NYSE:AMP) third-quarter 2016 operating earnings (excluding annual unlocking) per share of $2.29 missed the Zacks Consensus Estimate of $2.41. The results came in lower than expected primarily due to escalated operating expenses. However, a rise in revenues and the increase in AUM and assets under administration (“AUA”) were on the positive side.
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