Back to top

Image: Bigstock

Federated (FII) Q4 Earnings Beat Estimates, Revenues Rise

Read MoreHide Full Article

Federated Investors delivered a positive earnings surprise of 14.1% in fourth-quarter 2019. Earnings per share of 81 cents surpassed the Zacks Consensus Estimate of 71 cents. Moreover, the figure compared favorably with the prior-year quarter earnings of 61 cents.

Higher revenues and improved assets under management (AUM) were positives. Also, the company’s liquidity position was strong. However, elevated expenses were on the downside.

Net income was $82.1 million compared with $61.5 million in the year-ago quarter.

In 2019, the company reported net income of $272.3 million or $2.69 per share compared with $220.3 million or $2.18 in 2018.

Revenues Rise, Costs Escalate

Fourth-quarter total revenues climbed 17% year over year to $358 million. Also, the top line surpassed the Zacks Consensus Estimate of $350 million.

In full-year 2019, the company generated revenues of $1.33 billion, up 17% from the previous year. The figure beat the consensus estimate of $1.32 billion.

The top-line growth mainly stemmed from higher average money market and equity assets along with an increase in revenues from assets acquired from PNC Bank, N.A during the quarter.

Also, net investment advisory fees jumped 14% year over year to $243.6 million. In addition, administrative service fees surged 34% to $69.6 million. Further, net service fees (other) jumped 9% to $44.8 million.

During the fourth quarter, Federated derived 42% of its revenues from money-market assets, 52% from equity and fixed-income assets, 5% from alternative/private markets and multi-asset, and remaining 1% from sources other than managed assets.

With support from higher net investment income and lower debt expenses, the company recorded non-operating income of $8.88 million in the quarter against expenses of $6.16 million a year ago.

Total operating expenses escalated 16% year over year to $255.2 million. The rise was primarily due to higher office and occupancy, systems and communications and compensation and related expenses.

Steady Asset Position

As of Dec 31, 2019, total AUM was a record $575.9 billion — up 25% year over year. Average managed assets were $550.1 billion, up 24%.

Federated witnessed equity assets of $89 billion, rising 23% year over year. Also, money market mutual fund assets came in at $286.6 billion, up 37%.

Further, fixed-income assets grew 9% year over year to $69 billion. Additionally, money-market assets increased 31% to $395.5 billion.

As of Dec 31, 2019, cash and other investments were $340.6 million and total long-term debt totaled $100 million compared with $190.5 million and $135 million, respectively, as of Dec 31, 2018.

Our Viewpoint

Federated displays substantial growth potential supported by its diverse asset and product mix as well as a solid liquidity position. In addition, acquisitions are anticipated to be beneficial for the company. Though elevated expenses pose a concern, higher revenues could aid the company’s bottom-line performance.

Federated Investors, Inc. Price, Consensus and EPS Surprise

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

Competitive Landscape

Blackstone’s (BX - Free Report) fourth-quarter 2019 distributable earnings of 72 cents per share surpassed the Zacks Consensus Estimate of 68 cents. Moreover, the figure reflects an increase of 26.3% from the prior-year quarter.

Ameriprise Financial’s (AMP - Free Report) fourth-quarter 2019 adjusted operating earnings per share of $4.20 lagged the Zacks Consensus Estimate of $4.24. However, the figure was 10.5% higher than the year-ago quarter.

T. Rowe Price Group, Inc. (TROW - Free Report) delivered a positive earnings surprise of 4.1% in fourth-quarter 2019. Adjusted earnings per share came in at $2.03, outpacing the Zacks Consensus Estimate of $1.95. The figure also improved 31.8% from the year-ago quarter.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.

This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.

See their latest picks free >>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Blackstone Inc. (BX) - free report >>

T. Rowe Price Group, Inc. (TROW) - free report >>

Ameriprise Financial, Inc. (AMP) - free report >>

Published in