Affiliated Managers (AMG) Q1 Earnings Lag, Revenues Down

Affiliated Managers Group Inc.’s (NYSE:AMG) first-quarter 2019 economic earnings of $3.26 per share lagged the Zacks Consensus Estimate by a penny. Also, the figure was down 16.8% year over year.

Results were adversely impacted by decline in revenues and fall in assets under management (AUM). However, lower expenses and robust liquidity position acted as tailwinds.

Economic net income was $169 million, down21.5% from the prior-year quarter.

Revenues & Expenses Down

Total revenues fell 11.3% year over year to $543.1 million. However, the top line beat the Zacks Consensus Estimate of $535 million.

Adjusted earnings before interest, taxes, depreciation and amortization were $215.6 million, plunging24.7% from the year-ago quarter.

Total operating expenses decreased 10.9% to $387.8 million. All cost components except intangible amortization and impairments declined.

As of Mar 31, 2019, total AUM was $774.2 billion, down 6.8% year over year. Net outflows of $7.4 billion hurt AUM.

Capital & Liquidity Position Decent

As of Mar 31, 2019, Affiliated Managers had $305.2 million in cash and cash equivalents compared with $565.5 million as of Dec 31, 2018. Notably, the company had $1.78 billion of debt, down 2.7% from the Dec 31, 2018 level.

Shareholders’ equity as of Mar 31, 2019, was $3.14 billion, down from $3.46 billion as of Dec 31, 2018.

Share Repurchase Update

During the reported quarter, the company repurchased shares worth $91 million.

Equity Stake in Garda Capital

Concurrently, Affiliated Managers announced an agreement to acquire an equity interest in Minneapolis, MN-based Garda Capital Partners LP. Following the closure of the deal in the third quarter, the senior partners of Garda will continue to hold a majority of the equity of the business and direct the firm’s day-to-day operations.

With roughly $4 billion in AUM as of Apr 30, 2019, Garda is a leading alternative investment manager specializing in fixed income relative value strategies. It serves a diversified set of sophisticated institutional clients around the world.

Notably, the financial terms of the deal were not disclosed.

Our Take

Affiliated Managers’ muted revenue growth, owing to significant market volatility, remains a major concern. Nevertheless, it is well positioned for growth, based on successful partnerships and global distribution capability along with a diverse product mix. Moreover, robust AUM will likely support the top line.

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

Performance of Other Asset Managers

BlackRock, Inc.’s (NYSE:BLK) first-quarter 2019 adjusted earnings of $6.61 per share surpassed the Zacks Consensus Estimate of $6.20. However, the figure was 1.3% lower than the year-ago quarter’s number.

Blackstone (NYSE:BX) reported first-quarter 2019 distributable earnings of 44 cents, lagging the Zacks Consensus Estimate of 52 cents. However, the figure reflects improvement from 41 cents earned in the prior-year quarter.

Cohen & Steers’ (NYSE:CNS) first-quarter 2019 adjusted earnings came in at 58 cents per share, missing the Zacks Consensus Estimate by a penny. Also, the bottom line was 6.5% lower than the year-ago quarter figure.

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