On Jun 25, 2013, we reiterated our long-term recommendation on Ameriprise Financial, Inc. (AMP) at Neutral. Our decision rests on the company’s sound capital deployment activities and solid first-quarter 2013 earnings. However, we remain concerned about Ameriprise’s mounting expenses.
Why the Reiteration?
Ameriprise’s first-quarter operating earnings came in at $1.59 per share, marginally surpassing the Zacks Consensus Estimate of $1.57. Also, this improved 9.7% from the year-ago earnings of $1.45. Better-than-expected results were aided by top-line growth, partially offset by a rise in operating expenses. Further, assets under management and administration improved in the quarter.
Following the result release, the Zacks Consensus Estimate went up by 0.5% to $6.63 per share over the last 60 days. Moreover, for 2014, the Zacks Consensus Estimate went up by 0.7% to $7.70 per share over the same time frame. The company currently holds a Zacks Rank #2 (Buy).
In Apr 2013, Ameriprise hiked its quarterly cash dividend by 15.6% to 52 cents per share. Moreover, the board of directors approved a new share repurchase program worth an additional $2 billion for purchasing its common shares through 2014.
Ameriprise has grown inorganically and restructured its portfolio from time to time through acquisitions, sales and spin-offs. The company is expected to continue with its restructuring activities with an aim to remain profitable by focusing on its core businesses.
However, escalating expenses remain a major area of concern for Ameriprise as it may hamper its profitability. Moreover, the sluggish economic recovery and the existing low interest-rate environment are expected to keep Ameriprise’s financials under pressure in the near future.
Other Banks to Consider
Some other financial stocks worth considering include GAMCO Investors, Inc. (GBL), Noah Holdings Limited (NOAH) and Virtus Investment Partners, Inc. (VRTS). All these carry a Zacks Rank #1 (Strong Buy).
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