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Oct 30 (Reuters) - Money manager Janus Capital Group JNS.N could become an attractive acquisition target due to its franchise value and brand recognition, as the credit markets improve, said J.P. Morgan Securities analyst Kenneth Worthington.
Janus shares rose as much as 9 percent in early trade.
Worthington, who upgraded Janus stock to “neutral” from “underweight,” said investors are aware of poor equity market conditions and near-term performance weakness, and that the risks are now largely priced into the stock.
“Although we expect earnings to be depressed next year, we see the upside and downside to the stock as balanced,” Worthington wrote in a note to clients.
However, near-term performance remains poor and sales are expected to be ugly in October, the analyst added.
Worthington said he has been skeptical of Janus’ ability to drive costs down enough to offset significant margin degradation, but noted that the company has said it will reduce variable compensation to defend margins.
“If management can do this and keep key personnel motivated, our estimates could be too low,” he said. “The risk is degradation of the franchise.”
Worthington lowered his 2008 profit view for Janus to 85 cents a share from $1.12, but raised his 2009 earnings estimate to 50 cents a share from 38 cents.
Shares of the company were up 64 cents at $11.10 in morning trade on the New York Stock Exchange. They touched a high of $11.48 earlier in the session. (Reporting by Ratul Ray Chaudhuri in Bangalore; Editing by Himani Sarkar)