The Investment Management industry continues its uptrend with strong results for Q4 2013. Now may be a good time to consider a Zacks Rank # 1 (Strong Buy) stock from this top rated industry.
About the Company
Fortress Investment Group LLC (NYSE:FIG) is a diversified global investment management firm. Fortress has businesses across a range of investment strategies - private equity, credit, liquid markets and traditional asset management. It has over 1,500 institutional investors and private clients worldwide.
Third Quarter Results
FIG reported its third quarter earnings on October 31, 2013. Distributable earnings were $0.13 per share and $0.64 a share on a year-to-date basis, well above full-year results in both 2011 and 2012. Thus, the company appears to be on track to deliver its strongest year of distributable earnings since 2007.
AUM increased to $58 billion--an all-time high. All segments delivered strong performances, resulting in a surge in management fees and incentive income by double- and triple-digits, respectively, over the last year.
Net income (GAAP basis) surged to $101 million for the third quarter of 2013 (up from $7.0 million in the year-ago quarter) or $0.12 per diluted Class A share. Total revenue increased 27% year over year to $232 million.
Returning Cash to Shareholders
FIG has returned almost 70% of post-tax distributable earnings over last eight quarters through dividends and share repurchases. The company had increased its quarterly dividend by 20% to $0.06 per share in 4Q 2012.
During the Q3 earnings conference call, the management said that with zero debt and strong performance, they should have strong liquidity, when the board considers opportunistic buybacks and a year-end top-up dividend.
Positive Earnings Estimates Revisions and Rank/Recommendation Upgrade
FIG has been witnessing rising earnings estimates ahead of the fourth quarter results. The Zacks Consensus Estimate for Q4 2013 and fiscal 2014 are $0.20 per share and $0.90 per share respectively, up from $0.18 per share and $0.87 per share, 60 days ago.
As a result of positive earnings momentum, FIG earned a Zacks Rank #1 (Strong Buy) last month. It also has a longer-term recommendation of “Outperform.”
The Bottom Line
Investment Management industry appears poised to maintain its strong performance thanks mainly to higher asset inflows. In fact, the industry is currently ranked 22 out of 265 (top 8%). FIG’s top Zacks rank coupled with top industry rank indicates strong chances of outperformance in the coming months.
With its diversified and scalable core business platforms and strong balance sheet (zero debt), the company has a great potential to reward its shareholders over the long term.
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