Ameriprise: Best Stock On Great Block

6/23/2014


  Recent Price
$117
  Dividend
$2.32
  Yield
2.0%
  P/E Ratio
16
  Shares (millions)
199
  Long-Term Debt as % of Capital
48%
  52-Week Price Range
$118.65 - $76.77

With a Quadrix Overall score of 97 and both sector-specific ranks above 85, Ameriprise Financial ($117; AMP) is the best-looking company in the asset-manager industry — a highly attractive neighborhood, given U.S. demographic trends and the resilient stock market.

With more than 9,700 advisers, Ameriprise targets households with more than $100,000 of investable assets, a population segment it calls the mass affluent. Assets under management and administration swelled 11% to $782.8 billion over the past year, benefiting from the stock market's appreciation and strong fund inflows.

Besides the asset-management unit (26% of trailing 12-month sales), Ameriprise also sells life, disability, and property and casualty insurance (18%). Annuities (21%) and advisory services (35%) help protect retiring baby boomers from outliving
their investment portfolios.

About 92% of revenue comes from within the U.S., though in the past few years Ameriprise has expanded into Europe, Asia, Australia, Africa, and the Middle East.

Like many other asset managers, Ameriprise saw its shares initially struggle to make headway in 2014. But they have gained momentum in the past three months, producing a total return of 8%, ahead of the peer-group average of 3%. Ameriprise is a Focus List Buy and a Long-Term Buy.

Business breakdown

Ameriprise has a solid track record, ranking in the top 20% of our research universe for five-year earnings, sales, and dividend growth. Near-term trends are also robust, with sales rising 11% and operating profits up 31% in the 12 months ended March. Ameriprise generated $2.26 billion in operating cash flow over the last four quarters, compared to $862 million in the year-ago period. It also posted 12-month free cash flow of $1.74 billion, up fourfold.

S&P 1500 Index asset managers are expected to average 10% growth in per-share earnings for the current fiscal year, exceeding the broader financial sector's 6% growth target. Ameriprise's outlook appears particularly bright, with per-share profits projected to surge 16% in 2014. Consensus 2014 profit estimates for Ameriprise have jumped 3% over the past 90 days, while holding flat for the average financial stock. 

Despite the strong profit outlook, Ameriprise shares look cheap. At 16 times trailing earnings, the stock trades 12% below its industry median. Based on its forward P/E ratio of 14, the stock offers a 15% discount to its peers.

Stock buybacks have shaved 6% from the share count in the past year and 25% since the end of March 2010. Ameriprise's timing has proved fortuitous, as the company paid an average of $94 per share over the past year and $61 since March 2010. In April, management declared a fresh $2.5 billion stock buyback for the next two years, enough to repurchase 11% of its shares at current prices. In April, Ameriprise raised its quarterly dividend 12%, its sixth hike in the last four years. The stock yields 2.0%.

An annual report for Ameriprise Financial Inc. is available at 1099 Ameriprise Financial Center, Minneapolis, MN 55474; (612) 671-3131; www.ameriprise.com.

AMERIPRISE FINANCIAL
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Mar '14
2.04
vs.
1.59
11%
116.82
-
101.29
17 - 14
Dec '13
1.87
vs.
1.71
10%
115.36
-
89.37
17 - 13
Sep '13
1.91
vs.
1.32
13%
94.45
-
80.49
15 - 13
Jun '13
1.69
vs.
1.13
9%
84.29
-
69.35
15 - 12
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2013
11.23
7.05
2.01
115.36
-
63.59
16 - 9
2012
10.26
5.59
1.43
63.75
-
45.17
11 - 8
2011
10.24
4.00
0.87
65.12
-
36.00
16 - 9
2010
10.02
4.53
0.71
58.17
-
34.68
13 - 8
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
97
88
76
87
54
86
72

   * Earnings exclude special items.
   † Quadrix® scores are percentile ranks, with 100 the best.


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