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Analyst Blog

On Jun 25, 2013, we reiterated our long-term recommendation on Ameriprise Financial, Inc. (AMP - Analyst Report) 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 - Snapshot Report), Noah Holdings Limited and Virtus Investment Partners, Inc. (VRTS - Snapshot Report). All these carry a Zacks Rank #1 (Strong Buy).

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