Duff & Phelps (DUF): Zacks Rank Buy

Zacks

Duff & Phelps Corporation (DUF) reported impressive second quarter results, including an earnings surprise of 4.4%. This provider of financial advisory and investment banking services has surprised the Zacks Consensus Estimate in 6 of the last 7 quarters with an average beat of 5.1%.

This Zacks #2 Rank (Buy) stock has gained nearly 37% in a year's time, and it pays a regular quarterly dividend that yields 2.7%.

Upbeat 2Q Results

On July 24, Duff & Phelps reported second quarter 2012 adjusted earnings of 24 cents per share, beating the Zacks Consensus Estimate by a penny and improving 20.0% from the prior-year quarter. Top line growth and a solid performance by the Financial Advisory and Investment Banking segments led to the upbeat results. Nevertheless, it was partially offset by higher operating and direct client service expenses.

Total revenue rose 30.7% year over year to $118.9 million. However, direct client service costs jumped 28.5% to $69.0 million and operating expenses surged 20.8% to $33.1 million. In addition, operating income stood at $16.8 million, up 71.4% from the year-ago quarter.

As of June 30, 2012, cash and cash equivalents totaled $49.3 million and total assets were $644.0 million.

Earnings Estimates Advance

Over the last 60 days, the Zacks Consensus Estimate for 2012 increased 4.6% to 91 cents per share, implying year-over-year growth of 11.2%. For 2013, the Zacks Consensus Estimate improved 3.6% to $1.14 over the same time frame, representing annual EPS growth of 25.0%.

Dividend Payment

Since 2009, Duff & Phelps has been consistently paying dividends. The company announced a dividend hike of 12.5% in February 2012, marking its fourth dividend increase since initiation. Currently, the company pays a quarterly dividend of 9 cents per share, affirming a yield of 2.7%.

Reasonable Valuation

Shares of Duff & Phelps currently trade at 14.7x 12-month forward earnings, a 19.2% discount to the peer group average of 18.2x. Its price-to-book ratio of 1.5 is at a 25% premium to the industry median of 1.2. The company has a trailing 12-month ROE of 9.5%, compared with the peer group average of 4.1%.

Moreover, given the long-term growth projection of 15%, the PEG ratio comes in at 0.98, a 2.0% discount to the benchmark of 1 for a fairly priced stock. Thus, the expected long-term earnings growth is currently priced at a discount.

Chart Shows Strength

The stock has largely remained above S&P 500 over the last year.

Duff & Phelps is one of the strongest investment companies, and it enjoys rising estimates, a solid dividend yield and reasonable valuation. Moreover, with consecutive dividend increases, it offers an attractive upside potential.

Based in New York, Duff & Phelps is primarily engaged in providing financial advisory and investment banking services across North America, Europe and Asia. With over 1,000 employees spread across 25 offices around the world, the company serves publicly traded and privately held companies, government entities and investment firms. With a market capitalization of $569.2 million, Duff & Phelps competes with Arlington Asset Investment Corp. (AI) and Gleacher & Company, Inc (GLCH), among others.

DUFF&PHELPS CP (DUF): Free Stock Analysis Report

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