Assets under management reached a record $260 billion at the end of Federated's second quarter, a 23% increase from the previous year. That growth was the result of both the acquisition of an equity manager and net investment inflows. Federated reported equity funds under management of $43 billion at the end of the quarter, another record and a 42% increase over the previous year.
Revenue was $276.5 million, a 17% increase. Operating expenses also grew by 17%, largely the result of higher marketing and distribution expenditures and increased expenses related to an acquisition. Income from continuing operations was $55.3 million, an 18% increase over the $46.7 million earned in the second quarter of 2006. Earnings per share increased to $0.54, a 23% increase from the previous year. At its recent share price around $37, Federated stock trades at about 19 times earnings.
Federated stands apart from other publicly traded asset management firms. Giants like BlackRock
Federated has been trying to develop some of these same competitive advantages. In particular, the firm has been expanding its offerings of equity products, in part through strategic acquisitions. With more than $193 billion of assets under management in money market funds, however, Federated's identity is still very much associated with a low-margin corner of the asset management industry. Given recent volatility in equity and bond markets, as well as attractive short-term interest rates, investors might consider Federated's unique franchise to be well suited to the current investment climate.