Janus Capital Q1 Earnings In Line - Analyst Blog

Janus Capital Group Inc. JNS reported first-quarter 2014 earnings per share attributable to common shareholders of 16 cents, in line with the Zacks Consensus Estimate. However, results compared favorably with the prior-year quarter earnings of 15 cents.

Top-line growth and increased asset under management (AUM) depict the stability in earnings. However, net outflows and a rise in operating expenses were headwinds for the quarter.

Net income stood at $30.5 million compared with $28.0 million in the prior-year quarter.

Performance in Detail

Total revenue increased 7.5% year over year to $230.2 million, primarily due to higher investment management fee revenues, partially offset by negative performance fees. Moreover, revenues were above the Zacks Consensus Estimate of $226.0 million.

Total operating expenses increased 2.4% on a year-over-year basis to $163.3 million in the first quarter. The increase came on the back of higher employee compensation and benefits and distribution expenses. These were partly offset by lower depreciation and amortization along with reduced long-term incentive compensation.

Asset Position

As of Mar 31, 2014, Janus Capital reported AUM of $174.1 billion, up from $163.8 billion as of Mar 31, 2013 and $173.9 billion as of Dec 31, 2013. Moreover, average AUM increased to $173.0 billion from $161.8 billion in the prior-year quarter and $170.3 billion in the previous quarter.

The increase in company-wide assets during first-quarter 2014 primarily reflects net market appreciation of $1.9 billion, partially offset by long-term net outflows of $1.7 billion. Fundamental and mathematical equity long-term net outflows summed to $2.3 billion and $0.2 billion, while fixed income long-term net inflows totaled $0.8 billion during the quarter.

Balance Sheet

As of Mar 31, 2014, Janus Capital had stockholders' equity of $1.5 billion, cash and investments of $768.6 million and outstanding debt of $546.2 million compared with stockholders' equity of $1.5 billion, cash and investments of $830.0 million and outstanding debt of $544.6 million in the prior quarter.

Cash flow from operations during the reported quarter was a negative $36 million compared with $92.1 million in the prior quarter.

Capital Deployment Activity

During first-quarter 2014, Janus Capital repurchased 955,032 shares of its common stock at an average price of $11.00 per share and a total cost of $10.5 million.

Recently, Janus Capital's board of directors approved a 14% hike in the quarterly common stock dividend to 8 cents per share from 7 cents. The new dividend will be paid on May 23, 2014, to stockholders of record as of May 9.

Our Viewpoint

Janus Capital has the best-in-class investment boutique with potential for AUM and revenue along with competitive leverage growth. Capital deployment activities of the company are also commendable. However, weakness in flows remains a matter of concern.

Though the fixed income segment and global operations are showing signs of improvement, the company's equity-heavy portfolio makes it vulnerable to the equity market. Nevertheless, given its healthy balance sheet, we believe Janus Capital has the potential to perform well in the long run aided by a significant rebound in these markets.

Shares of Janus Capital currently carry a Zacks Rank #3 (Hold). Among other investment managers, Ameriprise Financial, Inc. AMP is scheduled to report March quarter-end results on Apr 28, while Invesco Ltd. IVZ and Legg Mason Inc. LM will report on May 1.