Guardian Partnership Will Expand Fixed Income Opportunities

Key Takeaways

• Strategic partnerships and innovative product initiatives are poised to expand Janus Henderson's fixed income assets, enhancing fee-generated revenues and future earnings prospects.
  
• Growth in insurance asset management and active M&A strategies are expected to bolster market presence and drive net revenue and margin improvements.
  
• Tumultuous market conditions and strategic costs may pressure net margins and earnings, despite growth opportunities like the Guardian partnership.

Catalysts

An asset management holding entity.

• The multifaceted strategic partnership with Guardian Life Insurance Company is expected to expand Janus Henderson's fixed income assets under management by managing Guardian's $45 billion investment-grade public fixed income portfolio. This is anticipated to boost net revenues through increased management fees generated from larger AUM.
  
• Janus Henderson's ongoing success in delivering positive net flows, driven by diverse regions and strategies including ETFs, multi-sector credit, and asset-backed securities, should contribute to revenue growth as these flows enhance asset management fees.
  
• Significant investment in product innovation, evidenced by $400 million of seed capital in partnership with Guardian, anticipates amplifying Janus Henderson’s high-quality active fixed income products. This can drive future earnings growth through successful product launches.
  
• The global insurance client base expansion to over $100 billion pro forma fixed income AUM positions Janus Henderson among top unaffiliated insurance asset managers, likely impacting future revenues positively as they capitalize on growth opportunities in insurance asset management.
  
• The active focus on M&A and strategic partnerships to expand market presence and enhance growth in emerging market debt, private market capabilities, and digital asset adoption is projected to boost organic growth, thereby potentially increasing net revenues and improving net margins.

Janus Henderson Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Janus Henderson Group's revenue will grow by 1.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 15.3% today to 19.7% in 3 years time.
• Analysts expect earnings to reach $522.3 million (and earnings per share of $3.53) by about May 2028, up from $390.2 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.2x on those 2028 earnings, down from 14.1x today. This future PE is lower than the current PE for the AU Capital Markets industry at 25.0x.
• Analysts expect the number of shares outstanding to decline by 1.83% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.13%, as per the Simply Wall St company report.

Janus Henderson Group Future Earnings Per Share Growth

Risks

• Market conditions are currently tumultuous, with changing monetary and fiscal policies, U.S. recession fears, and global trade uncertainty dampening investor sentiment. This could impact future revenue growth if investor confidence declines.
  
• Despite positive net flows, there was a decrease in assets under management by 1% due to market declines, signaling potential risk in revenue and earnings if market volatility continues.
  
• While the Guardian partnership is a growth opportunity, the management fee rate is expected to be 5 to 6 basis points lower after onboarding the assets, potentially impacting net margins.
  
• The company is navigating an uncertain landscape with expected higher non-compensation expense growth due to strategic investments, which could pressure net earnings if not matched by sufficient revenue growth.
  
• Active equity flows are currently negative amid a challenging market, and if these conditions persist or worsen, it could affect long-term investment performance and revenue.

Valuation

• The analysts have a consensus price target of $36.573 for Janus Henderson Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $45.0, and the most bearish reporting a price target of just $25.3.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.6 billion, earnings will come to $522.3 million, and it would be trading on a PE ratio of 13.2x, assuming you use a discount rate of 8.1%.
  
• Given the current share price of $35.05, the analyst price target of $36.57 is 4.2% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.