Janus Henderson Earnings: Lower Expenses and Tax Rate Lift Reported Results Above Expectations
While there was little in narrow-moat-rated Janus Henderson’s JHG third-quarter results that would alter our long-term view of the firm, we expect to lower our USD 26 (AUD 39) share fair value estimate 5%-10% to account for the impact that continued equity and credit market headwinds will have on results in both the near and long terms. We view the shares as being slightly undervalued.
Janus Henderson closed out the September quarter with USD 308.3 billion in assets under management, or AUM, down 4.3% sequentially but up 12.3% year over year. This was slightly worse than our forecast calling for USD 309.3 billion in AUM, as better flow results and market performance was offset by far worse currency exchange than we were forecasting.
Total net outflows of USD 2.6 billion during the quarter were better than our projection for USD 3.4 billion in outflows, as the firm’s equity, multi-asset, and alternatives platforms posted outflows of USD 2.3 billion, USD 0.7 billion, and USD 0.5 billion, respectively. This was offset somewhat by USD 0.9 billion in positive flows for the company’s fixed-income operations.
With average AUM up 5.0% year over year, Janus Henderson’s third-quarter revenue increased just 1.6%, owing to a reduction in the firm’s realization rate due to both mix shift and ongoing industry fee compression as well as continued negative performance fees. The company’s year-to-date top-line decline of 9.2% was slightly worse than our forecast calling for an 8% decline for all of 2023, and the firm now faces a more difficult fourth quarter, which means full-year revenue will likely be down closer to 10%.
As for profitability, year-to-date adjusted (GAAP) operating margins of 29.6% (22.2%) were 530 (280) basis points lower year over year but still at the upper end of our forecast for 26%-30% (19%-22%) for all of 2023. As we noted above, we expect the fourth quarter to be tougher, though, with both revenue and profitability ending up lower year over year.
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