Affiliated Managers (AMG) Beats On Q4 Earnings, Revenues Up

Affiliated Managers Group Inc. (NYSE:AMG) reported fourth-quarter 2017 economic earnings of $4.68 per share, outpacing the Zacks Consensus Estimate of $4.55. Also, earnings were up 23.2% year over year.

Rise in revenues and solid growth in assets under management (AUM) benefited the results. However, higher operating expenses remained an undermining factor.

Affiliated Managers’ economic net income was $261.3 million, an increase of 23.7% from the prior-year quarter.

For 2017, economic earnings of $14.60 per share surpassed the Zacks Consensus Estimate of $14.50. Also, earnings were up 13.7% year over year. Economic net income was $824.4 million, an increase of 17.2% from the prior-year quarter.

Revenues & Expenses Rise

Total revenues grew 9.8% year over year to $604.1 million. However, the top line missed the Zacks Consensus Estimate of $607.5 million.

For 2017, total revenues were $2.31 billion, up 5% year over year. Also, the figure was in line with the Zacks Consensus Estimate.

Earnings before interest, taxes, depreciation and amortization were $361.3 million, up 24.7% from the year-ago quarter.

Total operating expenses increased 4.8% year over year to $394.7 million. The rise was primarily due to higher compensation and related expenses, and other operating expenses.

As of Dec 31, 2017, total AUM grew 21.4% year over year to $836.3 billion. The quarter also witnessed net client cash inflow of $1 billion.

Capital & Liquidity Position Decent

As of Dec 31, 2017, Affiliated Managers had $439.5 million in cash and cash equivalents compared with $430.8 million as of Dec 31, 2016. Notably, the company had $809 million of senior bank debt compared with $868.6 million as of Dec 31, 2016.

Shareholders’ equity as of Dec 31, 2017, totaled $3.82 billion, up from $3.62 billion as of Dec 31, 2016.

Capital Deployment Activity

During the reported quarter, the company repurchased 0.7 million shares.

Concurrent with the earnings release, Affiliated Managers increased its share repurchase authorization to 5 million shares.

Also, the company announced a quarterly cash dividend of 30 cents per share, representing a hike of 50% from the prior payout. The dividend will be paid on Feb 23 to the shareholders on record as of Feb 8.

Our Take

Affiliated Managers remains well positioned for growth based on successful partnerships and global distribution capability, along with a diverse product mix. However, we remain concerned about the impact of increased debt levels and higher intangibles on its near-term profitability.

Affiliated Managers carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance & Upcoming Release of Other Asset Managers

BlackRock, Inc.’s (NYSE:BLK) fourth-quarter 2017 adjusted earnings of $6.24 per share outpaced the Zacks Consensus Estimate of $6.08. Results benefited from an improvement in revenues, rise in AUM and steady long-term inflows. However, increase in operating expenses acted as a headwind.

Ameriprise Financial Inc.’s (NYSE:AMP) fourth-quarter 2017 adjusted operating earnings per share of $3.26 comfortably surpassed the Zacks Consensus Estimate of $3.09. Also, the figure compares favorably with $2.73 per share registered in the year-ago quarter.

The Blackstone Group L.P. (NYSE:BX) is scheduled to come up with its financial numbers on Feb 1.

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