Federated Investors (NYSE:FII) beat average analyst expectations for revenue and earnings per share. Revenue rose 2% year over year, helped by growing equity assets in light of continued declines in money market balances.

The numbers
Federated Investors reported earnings of $37.6 million on revenue of $216.9 million. Earnings per share came in at $0.36, in line with earnings during the same quarter last year.

Item

Figure

Change year over year

Revenue

$216.9 million

2%

Net income

$37.6 million

Unchanged

Earnings per share

$0.36

Unchanged

Analysts expected average earnings per share of $0.35 on revenue of $214.7 million during the quarter.

It's all about fund flows
Federated Investors primarily manages fixed-income products, but equities make up the biggest slice of revenue -- 46% this quarter. Thus, it's important to watch how the company's earnings ebb and flow with the markets.

At the end of the quarter, Federated Investors reported managing:

  • Equity assets of $50.3 billion, up from $49.9 billion last quarter and $40.3 billion last year.
  • Fixed-income assets of $51.2 billion, up from $51.1 billion last quarter, and $50 billion last year.
  • Money market assets of $245.5 billion, up from $245.2 billion last quarter, but down significantly from $270.3 billion last year.

Market fluctuations proved to be a small, and trivial, headwind. Bonds and stocks traded sideways to down during the quarter. Net sales proved strong, however, with inflows topping outflows in four of five of its equity and fixed-income funds and separately managed account products, demonstrating the company's ability to grow assets under management irrespective of market movements.

Low rates may be hurting the company's money market products, but helping it in equities. Its top sellers are dividend-focused funds, with Federated Capital Income Fund and Federated Strategic Value Dividend Fund leading the way this quarter.

The Foolish bottom line
Money market outflows remain a sore spot for Federated Investors, but it's not hurting the bottom line. The company currently waives fees on its money market funds to retain customers in this low-rate environment.

Continued declines in money market assets could ultimately impact the upside from rising rates; but this quarter provides evidence that there's more to the Federated Investors story than just rising rates. Its other funds can attract profitable assets, too.

Jordan Wathen has no position in any stocks mentioned. The Motley Fool recommends Federated Investors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.