Ameriprise Amped For Additional Gains

11/8/2010


  Recent Price
$52
  Dividend
$0.72
  Yield

1.4%

  P/E Ratio
13
  Shares (millions)
260
  52-Week Price Range
$53.86 - $34.67

Spun off from American Express ($42; AXP) in 2005, Ameriprise Financial ($52; AMP) has transformed from an insurer into a financial conglomerate. Today, its broad portfolio of products and services includes mutual funds, annuities, insurance, and investment advice. Ameriprise targets the “mass affluent” — middle- and upper-middle-class investors with more than $100,000 of investable assets — and seems well positioned to capitalize on the wave of baby boomers cresting toward retirement.

Shares jumped 5% when Ameriprise reported September-quarter earnings of $1.37 per share excluding special items, up 32% and $0.29 above the consensus estimate. Operating revenue surged 26% to $2.43 billion on growth in all business segments. Total owned, managed, and administered assets jumped 48% to $649 billion, a result of market appreciation and the May acquisition of Columbia Management.

A Quadrix® Overall rank of 98 is supported by scores that rank in the top 20% of stocks in our research universe for Momentum (98), Earnings Estimates (97), Value (85), and Performance (83).  Ameriprise is a Buy and a Long-Term Buy.

Business breakdown

Ameriprise operates four primary divisions. The asset-management unit (24% of operating revenue and 22% of operating income for the September quarter) offers investment advice and products to retail and institutional clients. The financial-advice and wealth-management business (35% of revenue, 16% of income) also gives advice and provides full-service brokerage and banking services to retail clients. In addition, Ameriprise offers variable and fixed annuities (23%, 49%). Finally, the protection unit (18%, 12%) sells life, disability, and property-casualty insurance. The stability of its life-insurance business helped support Ameriprise during the recession, as did its high-quality investment portfolio, which ended the September quarter with a net unrealized gain of $2.3 billion.

In May, Ameriprise purchased Columbia Management from Bank of America ($11; BAC) for about $1 billion. Columbia Management, which specializes in long-term mutual funds, added $189 billion in assets to Amerisource, further diversifying an already broad revenue stream.

Part of the company’s vigorous cost management involves booting unproductive financial advisers. For instance, the number of advisers declined 6% in the year ended September, while revenue per advisor jumped 21% for the September quarter.

Conclusion

Shares of Ameriprise have appreciated 35% so far this year, though the valuation remains attractive at 13 times trailing earnings — 26% below its three-year average P/E. Rising consensus estimates for the December quarter project profits of $1.14 per-share, up 27%, and revenue of $2.56 billion, up 13%. Robust growth should continue into 2011, with the consensus calling for 18% higher per-share earnings and 10% higher revenue. An annual report for Ameriprise Financial Inc. is available at 243 Ameriprise Financial Center, Minneapolis, MN  55474; (612) 671-2080; www.ameriprise.com.

AMERIPRISE FINANCIAL
Quarter

    Per-Share
     Earnings*

Sales
Change

      Quarterly
      Price Range

P/E Ratio
Range

Sep '10 $1.37 vs. $1.04 + 26% $48.80 -

$34.68

13 - 9
Jun '10 0.98 vs. 0.41 + 36% 49.54 - 35.85 16 - 11
Mar '10 0.81 vs. 0.58 + 33% 45.88 - 36.14 16 - 12
Dec '09 0.90 vs.

-1.69

+ 66% 40.00 - 34.14 118 - 100
           
Year
(Dec.)

Sales
 (Bil.)

Per-Share
Earnings*
Per-Share
Dividend

52-Week Price Range

P/E Ratio
Range

2009 $7.89 $2.95 $0.68 $40.00
-
$13.50 14 - 5
2008 $7.15 ($0.17) $0.64 57.55
-
11.74 NM - NM
2007 $8.91 $3.39 $0.56 69.25
-
51.31 20 - 15
2006 $8.14 $3.48 $0.44 55.79
-
40.30 16 - 12
             
————————————————— Quadrix Scores † —————————————————
Overall Momen-
tum
Value Quality Financial
Strength
Earnings
Estimates
Performance
98 98 85 71 42 97 83

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


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