(Recasts; adds details)
Oct 10 (Reuters) - Merrill Lynch slashed its price target and fiscal 2008 earnings estimates on several U.S asset managers, citing valuation and lower assets under management.
“With no firm bottom in sight and record volatility, there’s very little visibility to earnings at this point,” analyst Cynthia Mayer said in a note to clients. “Long-term we continue to see asset managers as a good business, with higher margins and less balance sheet risk than many other financials.”
Mayer said few firms would be able to cope with the rapid drop in revenue caused by a fall in assets under management in the recent past.
The analyst said operating margins are likely to drop rapidly in the fourth quarter, particularly for bigger firms with high fixed costs, unless assets recover.
The note also said the performance of AllianceBernstein Holding L.P. and Franklin Resources Inc have been hit by the rally in the U.S dollar.
Merrill said its top pick remains Federated Investors Inc given its more defensive asset mix and the U.S government’s support for money market funds.
The following are the price target and estimate changes made by Merrill Lynch.
COMPANY EPS FORECAST PRICE TARGET
Current Prior Current Prior AllianceBernstein (AB.N) $3.08 $3.70 $31 $66 Afiliated Managers Group (AMG.N) $6.09 $6.75 $89 $124 Calamos Asset Management CLMS.O $0.10 $1.08 $14 $23 Cohen & Steers Inc (CNS.N) $1.11 $1.44 $14 $26 Eaton Vance Corp (EV.N)
$1.70 $1.88 $36 $43 Federated Investors Inc (FII.N) $2.15 $2.38 $32 $40 Franklin Resources (BEN.N) $6.76 $6.94 $87
$116 Gamco Investors (GBL.N) $1.40 $2.14 $31 $46 Invesco (IVZ.N) $1.51 $1.62 $21 $30 Janus Capital Group JNS.N $1.04 $1.16 $13 $29 Legg Mason Inc (LM.N) $0.48 $1.86 $29 $58 T. Rowe Price (TROW.O) $2.15 $2.39 $44 $64 Waddell & Reed (WDR.N) $1.55 $1.77 $22 $39 Och-Ziff Capital Management (OZM.N) — — $14 $20 (Reporting by Santosh Nadgir in Bangalore; Editing by Anil D’Silva)