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Analyst Blog

We issued an updated research report on Affiliated Managers Group Inc. (AMG - Analyst Report) on Jul 1, 2014. The company’s better-than-expected first-quarter results and consistent improvement in revenue seem impressive. However, we remain concerned about rising expenses, an overall stringent regulatory environment and the high debt level.

Over the past few years, Affiliated Managers has been recording steady growth in revenue driven by rise in assets under management (AUM). Moreover, the company has announced plans to enhance its U.S retail business, which in turn, will bolster top-line growth in the quarters ahead.

Moreover, following Affiliated Managers’ strong first-quarter results, the Zacks Consensus Estimate for 2014 climbed 1.0% to $11.76 per share over the last 60 days. For 2015, the Zacks Consensus Estimate advanced 1.2% to $13.65 per share over the same time period.

Despite the positives, we remain skeptical about the persistent rise in operating expenses. As Affiliated Managers continues to invest in affiliates, we do not foresee expenses decreasing in the near term.

At the same time, Affiliated Managers remains exposed to unfavorable economic and industry conditions. These, combined with a high debt obligation, might drag it to a relatively disadvantageous position.

Affiliated Mangers currently carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked investment managers include Kohlberg Kravis Roberts & Co. (KKR - Snapshot Report), Noah Holdings Limited and Woori Finance Holdings Co., Ltd. (WF). All these stocks sport a Zacks Rank #1 (Strong Buy).

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