Janus Capital Group Inc.’s (JNS) first-quarter 2011 earnings per share attributable to common shareholders came in at 21 cents, outpacing the Zacks Consensus Estimate by a penny, aided by higher assets under management (AUM).
However, results compared unfavorably with 36 cents reported in the prior quarter and favorably with 17 cents in the year-ago quarter. First-quarter 2011 results include 3 cents per share non-operating charge from the early retirement of debt.
For the reported quarter, net income was $37.9 million compared with $65.9 million in the prior quarter and $31.3 million in the year-ago quarter.
Chief Financial Officer (CFO) Greg Frost has decided to leave Janus Capital on August 1, 2011.
Behind the Headlines
Total revenue inched down 3.7% sequentially and inched up 7.5% year over year to $265.4 million in the first quarter. The revenue figure was modestly in line with the Zacks Consensus Estimate of $266.0 million. The sequential decline reflects lower separate account performance fees.
Total operating expenses increased 0.2% sequentially to $180.2 million, driven by higher employee compensation and benefits and general, administrative and occupancy expenses. Moreover, expenses also upped 0.3% year over year due to higher distribution expenses.
Operating margin was 32.1% compared with 34.7% in the prior quarter and 27.3% in the year-ago quarter.
Asset Position
As of March 31, 2011, Janus Capital’s reported AUM of $172.5 billion compared with $167.3 billion as of December 31, 2010, and $160.0 billion as of March 31, 2010. Average AUM increased 3.1% sequentially and 7.8% year over year to $172.5 billion.
The increase in overall assets during the reported quarter was driven by $6.7 billion of net market appreciation, partially offset by long-term net outflows of $2.7 billion. Long-term net outflows at mathematical equity and fundamental equity totaled $2.6 billion and $0.5 billion, respectively, which were partially offset by fixed income long-term net inflows of $400 million.
Balance Sheet
As of March 31, 2011, Janus Capital had stockholders’ equity of $1.2 billion, cash and investments of $588 million and outstanding debt of $681 million.
Janus Capital’s board of directors declared a regular quarterly cash dividend of 5 cents per share, representing an annualized dividend payout of 20 cents per share of common stock, a significant increase from annual cash dividend of 4 cents paid in 2010. The initial quarterly dividend will be paid on May 13, 2011 to shareholders of record as on May 2, 2011.
Our Take
Janus Capital, which has peers such as Calamos Asset Management Inc. (CLMS) and Waddell & Reed Financial Inc. (WDR), has the best-in-class investment boutique with the potential for AUM and revenue growth along with competitive leverage. However, weakness in flows remains a matter of concern.
Though fixed income and global businesses are improving, headwinds persist and the company’s equity-heavy portfolio exposes it to equity market volatility. Nevertheless, given its healthy balance sheet and total AUM growth, we believe Janus has the potential to outperform its peer group in the long run.
Janus Capital shares are carrying a Zacks #3 Rank, which translates into a short-term “Hold” recommendation. Also, considering the fundamentals, we are maintaining a ‘Neutral’ recommendation on the stock.
CALAMOS ASSET-A (CLMS): Free Stock Analysis Report
JANUS CAP GRP (JNS): Free Stock Analysis Report
WADDELL&REED -A (WDR): Free Stock Analysis Report
Zacks Investment Research