Affiliated Managers (AMG) Q4 Earnings Beat, Revenues Down

Affiliated Managers Group Inc.’s (NYSE:AMG) fourth-quarter 2018 economic earnings of $3.53 per share outpaced the Zacks Consensus Estimate of $3.51. However, the figure was down 24.6% year over year.

Slight fall in expenses supported the results. Also, the liquidity position remained strong. However, lower revenues and decline in assets under management (AUM) were the undermining factor.

Affiliated Managers’ economic net income was $185.8 million, witnessing a decline of 28.9% from the prior-year quarter.

For 2018, economic earnings of $14.50 per share lagged the Zacks Consensus Estimate of by a penny. Also, it was nearly 1% down on a year-over-year basis. Economic net income was $824.4 million, witnessing a fall of 5.3%.

Revenues & Expenses Down

Total revenues for the reported quarter fell 6.6% year over year to $564.4 million. However, the top line beat the Zacks Consensus Estimate of $555.9 million.

For 2018, total revenues increased 3.2% year over year to $2.38 billion. Also, itsurpassed the Zacks Consensus Estimate of $2.36 billion.

Adjusted earnings before interest, taxes, depreciation and amortization were $191.3 million, plunging47.1% from the year-ago quarter.

Total operating expenses decreased marginally year over year to $427.3 million. Rise in compensation and related expenseswas offset by lower net other expenses.

As of Dec 31, 2018, total AUM was $736 billion, down 12% year over year. Net outflows of $12.5 billion and market depreciation hurt AUM.

Capital & Liquidity Position Decent

As of Dec 31, 2018, Affiliated Managers had $565.5 million in cash and cash equivalents compared with $439.5 million as of Dec 31, 2017. Notably, the company had $1.52 billion of senior bank debt, down 1.8% from the Dec 31, 2017 level.

Shareholders’ equity as of Dec 31, 2018, was $3.46 billion, down from $3.82 billion as of Dec 31, 2017.

Capital Deployment Updates

During the reported quarter, the company repurchased shares worth $75.5 million.

Concurrently, Affiliated Managers announced a quarterly dividend of 32 cents per share, representing a hike of 7% from the prior payout. The dividend will be paid on Mar 1 to shareholder on record as of Feb 14.

Additionally, Affiliated Managers increased the share buyback authorization to 5 million shares.

Our Take

Affiliated Managers’ muted revenue growth, owing to significant market volatility, remains a major concern. Further, the company has substantial intangible assets that may require impairment, which consequently will have an adverse impact on its financials.

Nevertheless, it is well positioned for growth, based on successful partnerships and global distribution capability along with a diverse product mix. Moreover, improving AUM will likely support top-line growth.

Affiliated Managers currently 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’s (NYSE:BLK) fourth-quarter 2018 adjusted earnings of $6.08 per share missed the Zacks Consensus Estimate of $6.39. Further, the bottom line came in 2% lower than the year-ago figure.

Federated Investors, Inc. (NYSE:FII) delivered a positive earnings surprise of 1.7% in fourth-quarter 2018. Earnings per share of 61 cents surpassed the Zacks Consensus Estimate of 60 cents. However, the figure compares unfavorably with the prior-year quarter earnings of $1.31.

Invesco (NYSE:IVZ) reported fourth-quarter 2018 adjusted earnings of 44 cents per share, lagging the Zacks Consensus Estimate of 56 cents. Also, the figure was 39.7% below the prior-year quarter level.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>