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Janus Capital (JNS) Down on Q1 Earnings Miss; Dividend Up

Shares of global investment firm Janus Capital Group, Inc. JNS declined around 1.49% after the company recorded a negative earnings surprise of 9.52% in first-quarter 2016. The company reported earnings per share attributable to common shareholders of 19 cents, missing the Zacks Consensus Estimate by 2 cents. Moreover, earnings fell below the prior-year quarter figure of 23 cents.

Lower-than-expected results reflected the reduction in revenues and decrease in assets under management (AUM). However, the decline in operating expenses is a result of prudent expense management.

Performance in Detail

Total revenue decreased 5.4% year over year to $248.5 million in the quarter, primarily due to lower investment management and shareowner servicing fees and higher negative performance fees. Revenues also missed the Zacks Consensus Estimate of $255 million.

Total operating expenses decreased slightly on a year-over-year basis to $185.9 million in the quarter. The decrease was a result of a fall in almost all categories of expenses, partially offset by a rise in depreciation and amortization along with general, administrative and occupancy expenses.

Asset Position

Average AUM decreased to $180.2 billion from $186 billion in the year-ago quarter and from $191.2 billion in the preceding quarter.

As of Mar 31, 2016, Janus Capital reported total AUM of $191.3 billion, down from $192.3 billion as of Dec 31, 2015 and $192.4 billion as of Mar 31, 2015.

Notably, the reported quarter witnessed a sequential decrease in complex-wide assets, reflecting net market depreciation of $1.3 billion, exchange-traded product net inflows of $0.6 billion and long-term net outflows of $0.3 billion. Fundamental equity and fixed income long-term outflows summed $0.9 billion and $0.1 billion, respectively, partially offset by Mathematical equity long-term net inflows of $0.7 billion.

Balance Sheet

As of Mar 31, 2016, Janus Capital had stockholders’ equity of $1.7 billion, cash and investments of $608.4 million and outstanding debt of $403.3 million compared with stockholders’ equity of $1.7 billion, cash and investments of $691.5 million and outstanding debt of $406.1 million at the end of the preceding quarter.

Cash flow from operations in the reported quarter was negative $46.7 million compared with negative $58.9 million in the first quarter of 2015.

Capital Deployment Activity

During the first quarter, Janus Capital repurchased over 2.54 million shares of its common stock at an average price of $12.82 per share and a total cost of $32.6 million.

Concurrent with the earnings release, Janus Capital’s board of directors approved a 22% increase in its regular quarterly dividend to 11 cents per share from 9 cents. The new dividend will be paid on May 20, 2016, to shareholders of record as on May 9.

Our Viewpoint

Janus Capital has the best-in-class investment boutique with potential for strong AUM and revenue improvement along with competitive leverage growth. Capital deployment activities of the company are also commendable. Moreover, the recent stake acquisition in Kapstream enhances Janus Capital’s fixed income assets.

Given its healthy balance sheet, we expect Janus Capital to perform well over the long haul while its equity-heavy portfolio makes it vulnerable to the equity market. Further, lower revenues and AUM are key concerns.

Janus Capital currently carries a Zacks Rank #3 (Hold).

Among other investment managers, T. Rowe Price Group, Inc. TROW reported impressive first-quarter 2016 results with reported net income of $1.15 per share outpacing the Zacks Consensus Estimate of $1.02. Moreover, the reported figure increased from the year-ago earnings of $1.13.

Notably, the results included higher non-operating income which was a consequence of realized gains on investments and implementation of a new accounting guidance associated with the consolidation of certain sponsored investment portfolios.

Among others, Invesco Ltd. IVZ and Legg Mason Inc. LM are scheduled to release March quarter-end results on Apr 28 and Apr 29, respectively.

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JANUS CAP GRP (JNS): Free Stock Analysis Report
T ROWE PRICE (TROW): Free Stock Analysis Report
INVESCO LTD (IVZ): Free Stock Analysis Report
LEGG MASON INC (LM): Free Stock Analysis Report
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