Ameriprise Sees Golden Opportunity

6/27/2011


  Recent Price
$57
  Dividend
$0.92
  Yield
1.6%
  P/E Ratio
13
  Shares (millions)
258
  Long-Term Debt as % of Capital
42%
  52-Week Price Range
$65.12 - $34.68

Ameriprise Financial ($57; AMP) targets clients with investable assets exceeding $100,000, a criteria met by roughly 44 million U.S. households. Americans age 65 or older held more than 40% of U.S. financial assets last year, up from 32% in 2001.

Ameriprise represents an attractive value play. The shares are roughly flat for the year and look unduly cheap for a company that has generated about $6 per share in free cash flow over the last 12 months. Returns on equity and assets have rebounded sharply since the recession, and the stock is a Buy and a Long-Term Buy.

Business breakdown

Ameriprise's revenue has grown at least 17% in seven consecutive quarters, partly reflecting its shift into money management. Already established as an insurer, Ameriprise acquired three money managers for about $1.76 billion during the financial crisis. Higher management and advice fees have helped grow revenue in recent quarters, while assets under management jumped 69% over the last year.

Ameriprise has branded most of its U.S. asset-management products and services under the name of Columbia Management, a business it purchased in May 2010 from Bank of America ($11; BAC) for about $1 billion. The advice and wealth-management unit (35% of revenue in the 12 months ended March, 18% of pretax income) offers financial planning, brokerage, and banking services to retail clients. Revenue for the asset-management business (22%, 19%) is primarily fee-based and driven by the value of client assets. Assets under management reached $465 billion in the March quarter, up 2% from the end of 2010. Net operating revenue per adviser rose to $95,000 in the March quarter, up 23% from year-earlier levels, building on a 26% gain to $342,000 for the year ended December.

Annuities products (23%, 39%) and the majority of protection products (19%, 24%) use the RiverSource brand. These segments offer both variable and fixed annuities, along with insurance policies covering life, disability, property, and automobiles.

Ameriprise returned $441 million of capital to investors in the form of share buybacks and dividends in the March quarter, up 80% from December-quarter levels. The quarterly dividend rose 28% to $0.23 per share in April, and buybacks have shaved 3% off the share count in the past year. In June, management authorized another $2 billion for buybacks, in addition to the $531 million that remained at the end of March.

Conclusion

Wall Street sees per-share profits rising 24% to $1.36 in the June quarter on a 5% sales gain. For the full year, Ameriprise is expected to earn $5.60 per share, implying 25% growth on 17% higher revenue.

Shares trade at 10 times the 2011 profit estimate, a 26% discount to the average asset manager in the S&P 1500. Should Ameriprise hit Wall Street's target and the stock return to its three-year median trailing P/E of 12, shares would climb 18% to $67 by early 2012. 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
Mar '11
0.94
vs.
0.81
+ 17%
65.12
-
57.29
16 - 14
Dec '10
1.08
vs.
0.90
+ 17%
58.17
-
47.03
15 - 12
Sep '10
1.32
vs.
1.00
+ 25%
48.80
-
34.68
13 - 9
Jun '10
0.98
vs.
0.41
+ 36%
49.54
-
35.85
16 - 11
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2010
10.02
4.18
0.71
58.17
-
34.68
14 - 8
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
2007
8.91
3.39
0.56
69.25
-
51.31
20 - 15
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
84
75
91
66
48
14
49

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


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