AllianceBernstein L.P.’s (AB - Free Report) long-term issuer and commercial paper ratings have been affirmed by Moody's Investors Service at A2 and P-1, respectively. Moreover, the rating outlook is stable for the company.
Reasons Behind Affirmation
The ratings affirmations are reflective of AllianceBernstein’s strong investment franchise backed by its global distribution platform and robust balance sheet. Further, solid organic assets under management (AUM) growth aided the company.
The AUM balance has grown from $467 billion at the end of 2015 to $643 billion as of Aug 31, 2020. Notably, the company has witnessed positive net flows in active equity of $20 billion since the end of 2016. This has been achieved at a time when the investment management industry saw significant outflows.
In addition, the company’s low levels of leverage and robust liquidity make it less vulnerable to the present uncertain economic environment. Also, AllianceBernstein’s private wealth management and research business supports its credit profile as well as diversifies the revenue streams. Moreover, the company’s ongoing move to shift its headquarters to Nashville, TN from New York is likely to result in cost savings. The rating agency forecasts the move is likely to boost the bank’s pre-tax margins by 2.5%.
What can Trigger a Change in Moody’s Ratings?
AllianceBernstein’s ratings will likely be upgraded if it maintains an AUM balance above $600 billion, and AUM growth of 2.5% across all asset classes and clients. Furthermore, maintaining pre-tax margins above 25% will aid the company.
However, the ratings could be downgraded if the net outflows are 10% or above per year and the AUM balance declines below $350 million. Additionally, a rise in leverage to 2.4X and/or a significant rise in net debt could result in a downgrade.
Price Performance & Zacks Rank
Shares of AllianceBernstein have gained 18% so far this year compared with the 7.5% 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 has affirmed ratings and outlook for many finance sector companies. Amid the coronavirus pandemic and the resultant economic uncertainties, the rating agency has affirmed the ratings and maintained stable outlooks for Eaton Vance (EV - Free Report) , FirstCash (FCFS - Free Report) and SLM Corporation (SLM - Free Report) .
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