Cohen & Steers, Inc. ( CNS Quick Quote CNS - Free Report) is well poised for growth, driven by steady revenue growth and a strong balance sheet. However, mounting expenses and increased dependence on investment advisory revenues are concerns.
Cohen & Steers’ organic growth looks impressive. The company’s total revenues (GAAP basis) witnessed a five-year (2015-2019) CAGR of 5.7%. This upswing was mainly driven by solid AUM balance, which has witnessed a CAGR of 8.2% during the same time frame. The company’s wide range of products and sound investment strategies are likely to attract investors and further support revenue growth in the following quarters. Also, the AUM balance is expected to improve in the following quarters as the economy stabilizes.
Moreover, Cohen & Steers’ capital-deployment activities make it an attractive choice for investors. Since 2011, it has been increasing its dividend annually, with the latest one announced this February. Strong liquidity position and no debt keep the company’s capital deployments sustainable. Hence, it is expected to continue enhancing shareholder value.
Also, shares of this Zacks Rank #3 (Hold) company have gained 6.7% over the past year, as against the marginal decline recorded by the
However, Cohen & Steers’ escalating expenses is a concern. Expenses witnessed a CAGR of 5.7% over the last five years (ended 2019), due to a rise in employee compensation and benefits expenses, and general and administrative costs. Further, incremental investments in technology are expected to keep operating expenses elevated.
Additionally, the company’s high dependence on investment advisory revenues is another concern. Investment advisory revenues constituted more than 90% of total revenues at the end of the first six months of 2020. As Cohen & Steers will likely continue relying on this, a decline in advisory engagements or the market for advisory services might affect its financial performance.
Further, the Zacks Consensus Estimate for earnings has been revised 2.5% and 2.4% downward for 2020 and 2021, respectively, over the past two months.
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