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Eaton Vance's (EV) Ratings and Outlook Affirmed by Moody's
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Eaton Vance Corp.'s (EV - Free Report) senior unsecured and issuer ratings have been affirmed at A3 by Moody's Investors Service. Moreover, the ratings outlook is stable for the company.
The affirmation follows the company’s recent announcement that it has entered into a definitive agreement to be acquired by Morgan Stanley (MS - Free Report) for about $7 billion. The deal is likely to be concluded by the second quarter of 2021.
Reasons for Affirmation
The affirmations are reflective of the positive traits of Eaton Vance’s acquisition deal with Morgan Stanley. Following the closure of the deal, the company will gain access to Morgan Stanley’s established wealth management and international distribution channels. This in turn is expected to support its assets under management (AUM) balance.
Further, Moody’s believe that the transaction will speed up Eaton Vance’s largest affiliate, Parametric’s incursion in the U.S. retail market. Moreover, the rating agency expects the execution risk of the transaction to be low as Eaton Vance’s trustees voted unanimously in favor of the deal.
Also, the affirmations reflect that Eaton Vance’s ratings are at the same level as Morgan Stanley Bank N.A.’s (the leading banking subsidiary of Morgan Stanley) a3 adjusted baseline credit assessment. Moody’s is using this as a reference point for potential uplift for parental support. In lieu of this, any uplift to Eaton Vance's ratings upon the conclusion of the transaction is unlikely.
Further, the rating agency believes that Eaton Vance has a reputation as an innovator and a foremost presence in segments that are less exposed to the pressures faced by traditional active managers. A diverse product line, robust retail distribution network and a stable financial position aids its ratings. All these factors are likely to be further enhanced when integrated with Morgan Stanley Investment Management's abilities.
What Can Trigger Change in Ratings?
Ratings will likely be upgraded if Morgan Stanley or Eaton Vance's debt-issuing entity is designated as a material operating entity in former’s resolution plan. Also, earnings leading to leverage sustained below 1X, margin expansion and return on investment from the company's environment, social and governance, and global product and distribution initiatives lead to faster AUM growth can lead to a ratings upgrade for the company.
However, the ratings could be downgraded if there is any disruption or termination of the proposed deal with Morgan Stanley. Further, deterioration in earnings leading to leverage above 2X, margin contraction due to loss of higher fee assets and risk due to exposure to liquid retail products investing in illiquid underlying assets can lead to a ratings downgrade for the company.
Price Performance & Zacks Rank
Shares of Eaton Vance have gained 32.9% so far this year compared with the 4.5% increase of the industry it belongs to.
In the past few months, Moody’s affirmed ratings and outlook for many finance sector stocks. Amid the coronavirus pandemic and the resultant economic uncertainties, the rating agency affirmed ratings and maintained stable outlooks for FirstCash (FCFS - Free Report) , SLM Corporation (SLM - Free Report) and ItauUnibanco Holding S.A.
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Eaton Vance's (EV) Ratings and Outlook Affirmed by Moody's
Eaton Vance Corp.'s (EV - Free Report) senior unsecured and issuer ratings have been affirmed at A3 by Moody's Investors Service. Moreover, the ratings outlook is stable for the company.
The affirmation follows the company’s recent announcement that it has entered into a definitive agreement to be acquired by Morgan Stanley (MS - Free Report) for about $7 billion. The deal is likely to be concluded by the second quarter of 2021.
Reasons for Affirmation
The affirmations are reflective of the positive traits of Eaton Vance’s acquisition deal with Morgan Stanley. Following the closure of the deal, the company will gain access to Morgan Stanley’s established wealth management and international distribution channels. This in turn is expected to support its assets under management (AUM) balance.
Further, Moody’s believe that the transaction will speed up Eaton Vance’s largest affiliate, Parametric’s incursion in the U.S. retail market. Moreover, the rating agency expects the execution risk of the transaction to be low as Eaton Vance’s trustees voted unanimously in favor of the deal.
Also, the affirmations reflect that Eaton Vance’s ratings are at the same level as Morgan Stanley Bank N.A.’s (the leading banking subsidiary of Morgan Stanley) a3 adjusted baseline credit assessment. Moody’s is using this as a reference point for potential uplift for parental support. In lieu of this, any uplift to Eaton Vance's ratings upon the conclusion of the transaction is unlikely.
Further, the rating agency believes that Eaton Vance has a reputation as an innovator and a foremost presence in segments that are less exposed to the pressures faced by traditional active managers. A diverse product line, robust retail distribution network and a stable financial position aids its ratings. All these factors are likely to be further enhanced when integrated with Morgan Stanley Investment Management's abilities.
What Can Trigger Change in Ratings?
Ratings will likely be upgraded if Morgan Stanley or Eaton Vance's debt-issuing entity is designated as a material operating entity in former’s resolution plan. Also, earnings leading to leverage sustained below 1X, margin expansion and return on investment from the company's environment, social and governance, and global product and distribution initiatives lead to faster AUM growth can lead to a ratings upgrade for the company.
However, the ratings could be downgraded if there is any disruption or termination of the proposed deal with Morgan Stanley. Further, deterioration in earnings leading to leverage above 2X, margin contraction due to loss of higher fee assets and risk due to exposure to liquid retail products investing in illiquid underlying assets can lead to a ratings downgrade for the company.
Price Performance & Zacks Rank
Shares of Eaton Vance have gained 32.9% so far this year compared with the 4.5% increase of the industry it belongs to.
Currently, the company carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Rating Actions on Other Finance Companies
In the past few months, Moody’s affirmed ratings and outlook for many finance sector stocks. Amid the coronavirus pandemic and the resultant economic uncertainties, the rating agency affirmed ratings and maintained stable outlooks for FirstCash (FCFS - Free Report) , SLM Corporation (SLM - Free Report) and ItauUnibanco Holding S.A.
Zacks’ 2020 Election Stock Report: In addition to the companies you learned about above, we invite you to learn more about profiting from the upcoming presidential election. Trillions of dollars will shift into new market sectors after the votes are tallied, and investors could see significant gains. This report reveals specific stocks that could soar: 6 if Trump wins, 6 if Biden wins. Check out the 2020 Election Stock Report >>