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Federated (FII) Exhibits Rising Expenses: Should You Hold?
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On Mar 8, we issued an updated research report on Federated Investors, Inc. . The company’s shares declined 16.6% in the last six months, underperforming the 9.8% growth for the Zacks categorized Investment Management industry.
This dismal performance stemmed from escalating expenses and near-term concerns related to investment advisory fees (comprising 68% of total revenue) as the changes in assets under management (AUM) owing to market fluctuations and foreign exchange translations, along with regulatory changes, could hurt this revenue source.
Here are a few concerns that led the stock to underperform the broader industry so far:
Firstly, escalating operating expenses remain a major concern for Federated. Notably, compensation expenses which constitute nearly 38% of the company’s total cost base are projected to be nearly $75 million for first-quarter 2017, reflecting around 9% sequential growth. Further, the combined impact of fewer working days and higher estimated compensation, and related expense is expected to reduce the operating income by $10 million sequentially in the first quarter.
Secondly, increased regulatory pressure and oversight of the investment management industry in the U.S. continue to impact business operations.
Thirdly, over the last 60 days, the Zacks Consensus Estimate for the stock moved down nearly 3.0% to $1.94, for 2017.
However, Federated’s consistent acquisition of money market assets, expansion moves and declining fee waivers look encouraging. In addition, steady capital deployment activities enhance shareholders’ value.
Notably, in the last few years, Federated has inked strategic deals and thereby expanded operations in the UK and Chile. The company continues to seek alliances and acquisitions to fortify its business in Europe and the Asia-Pacific region, as well as in the U.S. and the rest of the Americas.
Currently, Federated carries a Zacks Rank #3 (Hold).
Lazard Ltd. (LAZ - Free Report) has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 16.2% over the last six months. It presently carries a Zacks Rank #2.
Apollo Global Management, LLC (APO - Free Report) has been witnessing upward estimate revisions for the last 60 days. Over the last six months, the company’s share price has been up more than 21%. It also holds a Zacks Rank #2.
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Federated (FII) Exhibits Rising Expenses: Should You Hold?
On Mar 8, we issued an updated research report on Federated Investors, Inc. . The company’s shares declined 16.6% in the last six months, underperforming the 9.8% growth for the Zacks categorized Investment Management industry.
This dismal performance stemmed from escalating expenses and near-term concerns related to investment advisory fees (comprising 68% of total revenue) as the changes in assets under management (AUM) owing to market fluctuations and foreign exchange translations, along with regulatory changes, could hurt this revenue source.
Here are a few concerns that led the stock to underperform the broader industry so far:
Firstly, escalating operating expenses remain a major concern for Federated. Notably, compensation expenses which constitute nearly 38% of the company’s total cost base are projected to be nearly $75 million for first-quarter 2017, reflecting around 9% sequential growth. Further, the combined impact of fewer working days and higher estimated compensation, and related expense is expected to reduce the operating income by $10 million sequentially in the first quarter.
Secondly, increased regulatory pressure and oversight of the investment management industry in the U.S. continue to impact business operations.
Thirdly, over the last 60 days, the Zacks Consensus Estimate for the stock moved down nearly 3.0% to $1.94, for 2017.
However, Federated’s consistent acquisition of money market assets, expansion moves and declining fee waivers look encouraging. In addition, steady capital deployment activities enhance shareholders’ value.
Notably, in the last few years, Federated has inked strategic deals and thereby expanded operations in the UK and Chile. The company continues to seek alliances and acquisitions to fortify its business in Europe and the Asia-Pacific region, as well as in the U.S. and the rest of the Americas.
Currently, Federated carries a Zacks Rank #3 (Hold).
Stocks to Consider
Ameriprise Financial, Inc. (AMP - Free Report) has been witnessing upward estimate revisions for the last 60 days. Further, the stock surged over 30.6% over the past six months. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Lazard Ltd. (LAZ - Free Report) has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 16.2% over the last six months. It presently carries a Zacks Rank #2.
Apollo Global Management, LLC (APO - Free Report) has been witnessing upward estimate revisions for the last 60 days. Over the last six months, the company’s share price has been up more than 21%. It also holds a Zacks Rank #2.
8 Stocks with Huge Profit Potential
Just released: Driverless Cars: Your Roadmap to Mega-Profits Today. In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>