Affiliated Managers Group Looks Inexpensive

There was little in

While average AUM (on an adjusted basis) was up 5.7% year over year, the firm still reported a 6.7% decline in fourth-quarter revenue due primarily to a reduction in AMG's fee realization rate to 0.339% from 0.384% in the prior-year's period, which was driven almost entirely by mix shift. Full-year revenue was down 11.7%, at the upper end of our projection for a high-single to low-double-digit decline in revenue for all of 2016. As for profitability, AMG's full-year operating margins of 32.1% were at the lower end of our forecast for margins of 32%-33%. While the company had pulled back on share repurchases in the back half of 2016, management expects to be able to buy back $200 million worth of stock in the first half of 2017, which is included in its revised earnings guidance of $13.75-$15.75 per share (down from $14.00-$16.00 previously). AMG also initiated a quarterly cash dividend of $0.20 per share--equivalent to around a 0.5% yield--with the first payout expected in late February.

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