Sandler O’Neill Cut Estimates and Price Target Price for Eaton Vance

From Barron’s:

Based on our math, we think Eaton Vance generated about $2 billion of net inflows during fiscal first quarter, translating into 5%-plus annualized organic growth. Though down from the $5.5 billion (15% growth) in fiscal fourth quarter (Oct.), the prior quarter included $3 billion-plus of lower-fee institutional mandates.
Looking ahead, we expect Eaton Vance to continue to gain market share reflecting strong long-term investment performance track records, reaccelerating equity volumes, broadening flows, and rising demand for the firm’s equity income and tax-managed strategies given the specter of higher tax rates.
As January AUM came in below our forecast, we are taking down our fiscal 2010 (Oct) and fiscal 2011 earnings-per-share estimates from $1.68/$2.04 to $1.59/$1.93, bringing us about in line with consensus.
Moreover, our fiscal-first-quarter forecast falls by two cents to 37 cents. As a result of our lower earnings outlook, we are reducing our price target by $1 to $32, or less than 10% upside potential from current levels.
While Eaton Vance continues to generate above-average flows, we think further upside from here is limited given the stock’s seemingly full valuation. Eaton Vance is currently trading at 19 times our revised fiscal 2010 EPS estimate, or about 15% higher than the peer group average of 16-17 times.

Posted by on February 18th, 2010 at 9:06 am


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