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Risk-Reward Balances Ameriprise

Zacks Equity Research

On Sep 19, 2013, we reiterated our long-term recommendation on Ameriprise Financial, Inc. (AMP) at Neutral. This was based on the company’s strong second-quarter earnings and improvement in client activities. However, sluggish economic recovery and rising expenses remain causes of concern.

Why Neutral?

Ameriprise’s second-quarter operating earnings surpassed the Zacks Consensus Estimate. Results were aided by top-line growth, partially offset by higher operating expenses.

We view Ameriprise as an asset for yield-seeking investors, given the company’s regular dividend payments and consistent share repurchase programs. Ameriprise has been meaningfully deploying capital to boost investors’ confidence. Moreover, the company operates a well-diversified portfolio that enables it to grow organically. Additionally, from time to time, the company has grown inorganically and restructured its portfolio to meet the changing market demands in modern times.

The Zacks Consensus Estimate for 2013 increased 2.0% to $6.76 per share over the last 60 days. For 2014, the Zacks Consensus Estimate advanced 1.7% to $7.82 per share over the same time frame. Hence, Ameriprise currently carries a Zacks Rank #2 (Buy).  

On the flip side, increased expenses remain a major concern for Ameriprise. Additionally, the sluggish economic recovery, low interest-rate environment and the European sovereign debt crisis can lead to outflows, decreased demand, management fee revenues and reduced benefits from economies of scale.

Other Stocks to Consider

Some other investment management stocks worth a look include GAMCO Investors, Inc. (GBL), Affiliated Managers Group Inc. (AMG) and The Blackstone Group L.P. (BX). While GAMCO Investors carries a Zacks Rank #1 (Strong Buy), both Affiliated Managers and Blackstone carry the same Zacks Rank as Ameriprise.

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