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Why Federated (FII) is Worth Adding to Your Portfolio Now

Zacks Equity Research

With record equity assets of $82 billion and 5.1% year-over-year growth in earnings per share in the second quarter, Federated Investors, Inc. FII can be a solid bet now. The company’s diversified asset and product mix, along with the continued acquisition of money market assets amid volatile markets, is anticipated to yield upbeat results.

Though Federated’s compliance-related fees continue to escalate, given the strictly regulated nature of investment management business, sharper focus on restructuring the product line and merging certain funds may make the growth path smoother.

With $502.2 billion in managed assets as of Jun 30, 2019, Federated is one such stock which not only trumped estimates in the June-end quarter, but has also been witnessing upward estimate revisions. This suggests analysts’ optimism about the company’s future prospects. Over the last 30 days, the Zacks Consensus Estimate for 2018 and 2019 moved up 3.8% and 5.4%, respectively.

Additionally, shares of this Zacks Rank #1 (Strong Buy) company have gained 17.9% in the past six months compared with 1.1% growth recorded by the industry.

Notably, Federated has a number of other aspects that make it an attractive investment option.

5 Reasons Why Federated is a Must Buy  

Earnings Strength: Federated witnessed historical earnings per share (three-five years) growth of 13.22%. In addition, the company’s long-term (three-five years) estimated EPS growth rate of 7.27% promises rewards for investors over the long run. Also, it recorded an average positive earnings surprise of 2.25%, over the trailing four quarters.

Strategic Deals: Under the prevailing pressure for money-market funds, acquisition of money-market assets displays the company’s buoyancy in the money-market business. Increased money-market AUM will furnish the company with various new fund offerings that would benefit its clients. Further, in the last few years, Federated has inked strategic deals, thereby expanding operations in the U.K. and Chile. Notably, the company continues to seek alliances and acquisitions to expand its business in Europe and the Asia-Pacific region as well as in the United States and rest of the Americas.

Strong Leverage: Federated’s debt/equity ratio is 0.26 compared with the industry average of 0.44, indicating relative lower debt burden. It highlights the company’s financial stability even in an unstable economic environment.

Superior Return on Equity (ROE): Federated’s ROE of 27.29%, as compared with the industry average of 13.43%, highlights the company’s commendable position over its peers.

Stock Looks Undervalued: The stock currently has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential.

Other Stocks to Consider  

T. Rowe Price Group, Inc. TROW has been witnessing upward estimate revisions for the past 30 days. Moreover, this Zacks #1 Ranked stock has rallied more than 15.9% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.

AllianceBernstein Holding L.P. AB has been witnessing upward estimate revisions for the past 30 days. Further, the company’s shares have gained 2.5% year to date. At present, it carries a Zacks Rank of 2.

Ameriprise Financial, Inc. AMP has been witnessing upward estimate revisions for the past 30 days. Additionally, the stock has jumped around 25.6% year to date. It currently carries a Zacks Rank #2.

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Ameriprise Financial, Inc. (AMP) : Free Stock Analysis Report
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