Pimco's not ready for the graveyard yet: Morningstar

PIMCO headquarters building in Newport Beach, Calif.
Scott Mlyn | CNBC
PIMCO headquarters building in Newport Beach, Calif.

Bond giant Pimco remains bruised, but it was not broken following the departure of its high-profile founder in 2014, according to a Morningstar analysis.

The Newport Beach, California-based firm is nearing an important point, however, in that it has seen clients withdraw some $290 billion. That puts it near where Morningstar earlier had identified as a critical point when Pimco's profit margin would shrink in a meaningful way.

"We continue to have a cautiously optimistic outlook for Pimco's future," Morningstar said in a white paper it released Thursday. "We're encouraged at the progress the firm's leaders have made in stabilizing the investment team, fortifying the firm's culture, and continuing to invest in its research effort. Yet, the situation is fluid amid continued outflows and an investment team still in the formative stages of jelling and reforging its identity."

Investors have been watching the firm closely since the high-profile departure early in 2014 of co-CEO Mohamed El-Erian.

That scrutiny intensified when its founder, Bill Gross, jumped ship in September, after 40 years, for Janus Capital, a much smaller firm where he now manages an unconstrained fund. Outflows have plagued Pimco in general, but in particular its Total Return Fund, which until recently was the largest bond fund in the world before seeing its assets under management tumble to $107.3 billion.

"Flows from Pimco's total return have been really significant. There's no way to sugarcoat that," Sarah Bush, Morningstar's associate director of fixed income strategies, said during a conference call. "Those flows have driven a fairly significant decline in Pimco's total AUM. We are encouarged to see they have slowed significantly."

Read MoreHair-raising bond rout leads to capitulation

The outflow figures indeed have been stunning.

The Total Return Fund, which currently carries a three-star rating, has lost $180.6 billion since June 2013 and $113.3 billion just since Gross' departure more than eight months ago. The firm itself once managed more than $2 trillion and is now at about $1.6 trillion.

Pimco declined comment on the Morningstar report. In a release last month, the firm pointed out that Total Return outflows slowed to $5.6 billion in April and noted the fund was outperforming its Barclays benchmark this year.

Morningstar had estimated Pimco could sustain as much as a $350 billion total hit to the firm before it started impacting margins.

"With the firm's assets down roughly $290 billion between September and March 2015, the firm is getting close to that point—and more quickly than we had expected or modeled," the report said. "The decline in assets over the course of 2014 and the corresponding fall in revenue have already led to a marked decline in Pimco's profitability in 2014."

Read MoreBill Gross wants to 'whip the pants' off Pimco

"Even assuming that the firm's assets under management have stabilized now, we expect Pimco's overall profitability would continue to decline in 2015," Morningstar added.

Still, the analysts were far from ready to write off Pimco as a second-tier player just yet.

Pimco's move from a U.S.-focused firm to one with a more global perspective will serve it well, said Michael Herbst, Morningstar's director of fixed income strategies.

"Bill Gross' departure garnered a ton of press here in the United, States, but that's a little bit of a home-country bias in our view," Herbst said. "Actually, they are continuing to win mandates outside the United States, which very mysteriously you don't hear as much about in the media."