On January 9, 2013, we reaffirmed our long-term Neutral
Ameriprise Financial Inc.
) based on its consistent assets under management (AUM) growth
and robust capital deployment actions. However, elevated expenses
and unsettling macro-economic factors are expected to remain a
drag on its profitability in the near to medium term. Moreover,
this financial services company retains a Zacks Rank #3 (Hold).
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Why the Neutral Stance?
We have maintained this stance since none of the estimates moved
upwards over the last 60 days. In addition, over the past four
quarters, Ameriprise has delivered two positive and two negative
earnings surprises with an average surprise of negative 3.2%.
The company is expected to announce its fourth quarter 2012
results on January 30. The Zacks Consensus Estimate for the
quarter is pegged at $1.49 per share on revenue expectation of
$2,567 million. The company had delivered better-than-expected
third-quarter earnings on the back of augmented top line and
Further, a well-diversified portfolio compared with its industry
peers along with powerful capital deployment actions are the
positives for the company. Also, growth through acquisitions has
helped it expand significantly and better serve the dynamic
markets. The recent and most notable acquisition is the asset
management business of Columbia Management from
Bank of America Corporation
) in 2010. This acquisition has significantly pushed up the
performance of Ameriprise's retail mutual fund and institutional
However, escalating expenses remain a major headwind for the
company. Higher distribution expenses, general and administrative
expenses, elevated interest and debt expense as well as bank
conversion expenditure are expected to further increase its
expenses, putting the bottom line under pressure. In addition,
existing low interest rate environment and the ongoing outflows
related to the integration of Columbia Management will keep
Ameriprise's financials under pressure in the near term.
The earnings ESP (expected surprise prediction) - the percentage
difference between the Most Accurate Estimate and the Zacks
Consensus Estimate - for the company is 0.67%. This, coupled with
its Zacks Rank of 3, indicates that the company will surely beat
the Zacks Consensus Estimate.
Other Stocks to Consider
The other stocks in the banking sector that are performing well
and are worth considering include
AllianceBernstein Holding L.P.
Virtus Investment Partners, Inc.
). Both of these companies carry a Zacks Rank #1 (Strong