Janus Capital Beats Estimates – Analyst Blog

Janus Capital Group Inc.’s (JNS) second quarter earnings per share came in at 17 cents, outpacing the Zacks Consensus Estimate of 15 cents primarily due to higher average assets under management (AUM). This also came in significantly higher than the 10 cents reported in the year-ago quarter but was flat sequentially. Net income was $30.2 million as compared with $31.3 million in the prior quarter and $15.8 million in the year-ago quarter.

 

Amid a tough environment, Janus Capital progressed through enhanced performance at institutional investments such as INTECH and Perkins, significant growth in its fixed income business, and a successful U.S. retail franchise.

 

 

Total revenues increased 1% sequentially and 24.5% year over year to $249.3 million, surpassing the Zacks Consensus Estimate of $248.0 million. The increase reflects growth in investment management fees and shareowner servicing fees, partially offset by decreased performance fees.

 

Total operating expenses increased 4.5% sequentially and 22.7% year over year to $187.9 million. Operating expenses increased $8.3 million or 4.6%, largely due to fund proxy costs incurred in the reported quarter, higher long-term incentive compensation, higher marketing and advertising expenses, and higher distribution expenses. These were partially offset by a decline in administrative expenses.

 

Operating margin was 24.6% compared with 27.3% in the prior quarter and 23.5% in the year-ago quarter. 

 

 

As of June 30, 2010, Janus Capital’s total AUM was $147.2 billion compared with $165.5 billion as of March 31, 2010 and $132.6 billion as of June 30, 2009. Average AUM during the reported quarter increased 0.1% sequentially and 26.4% year over year to $160.2 billion.

 

The decrease in overall assets reflects $17.0 billion of net market appreciation and $1.3 billion of long-term net outflows. In the company’s three investment boutiques, long-term net outflows at INTECH and Perkins were $1.5 billion and $1.0 billion, respectively, which were partially offset by fixed income long-term net inflows of $1.2 billion. Perkins’ flows were impacted by one significant equity mandate loss totaling $1.8 billion during the reported quarter. 

 

 

As of June 30, 2010, Janus Capital had stockholders’ equity of $1.1 billion, cash and investments of $442 million and outstanding debt of $796 million.

 

At the end of June 2010, Janus Capital managed $147.2 billion in assets for shareholders, clients and institutions across the globe. Based in Denver , Janus Capital also has offices in London , Milan , Munich , Singapore , Hong Kong, Tokyo and Melbourne .

Given its healthy balance sheet and average AUM growth, we believe Janus has the potential to outperform its peer group in the long run, although near term headwinds prevail due to the fragile state of the global economic markets.

 

Janus Capital currently retains its Zacks #4 rank which translates to a short-term Sell rating. However, considering the fundamentals, we are maintaining our Neutral recommendation on the stock.