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Restructuring Efforts Aid Ameriprise (AMP), High Costs a Woe

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Supported by a solid balance sheet, Ameriprise Financial, Inc. AMP is well positioned for organic as well as inorganic growth. Moreover, its efficient capital deployment activities should continue enhancing shareholder value. However, consistently increasing expenses and elevated levels of outflows in the Asset Management segment remain causes for concern.

The company’s shares have gained 13.4% in the past year, underperforming 17.3% growth for the industry it belongs to.

Notably, its Zacks Consensus Estimate for current-year earnings has remained stable over the last 30 days. Thus, the stock currently carries a Zacks Rank #3 (Hold).

Looking at the fundamentals, the company’s revenues have witnessed a CAGR of 1.8% over the last five years (2013-2017). In order to face competition and keep pace with the changing market needs, Ameriprise has been modifying its products and services consistently. Moreover, its efforts to launch new products should further support top-line growth in the future.

The company’s inorganic growth story also remains impressive. From time to time, it has restructured its portfolio through acquisitions, sales and spin-offs. In fact, with an aim to remain profitable, it is likely to continue with the restructuring initiatives.

However, over the last five years (2013-2017), the company’s expenses have witnessed a CAGR of 1.5%. Elevated costs, mainly because of advertising campaign and technology upgrades, are expected to hurt bottom-line growth in the quarters ahead.

Further, elevated levels of outflows in the Asset Management segment, which is one of the major sources of the company’s revenues remains a cause for concern. Management expects outflows to continue in the coming quarters (albeit at a slower pace), which is likely to affect the segment’s performance.

Stocks to Consider

Some better-ranked stocks in the same space are Waddell & Reed Financial, Inc. WDR, Lazard Ltd LAZ and Virtus Investment Partners, Inc. VRTS.

Waddell & Reed’s earnings estimates for the current year have been revised 12% upward over the last 60 days. Also, its shares gained 16.2% in a year’s time. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lazard’s current-year earnings estimates have been revised 3.1% upward over the last 60 days. Its shares increased 12.4% in the last year. It has a Zacks Rank #2 (Buy).

Virtus Investment Partners also carries a Zacks Rank of 2. Its current-year earnings estimates have been revised 4.1% upward over the last 60 days. Its share price has increased 17.1% in the last year.

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Waddell & Reed Financial, Inc. (WDR) : Free Stock Analysis Report
Ameriprise Financial, Inc. (AMP) : Free Stock Analysis Report
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