William Blair & Co. cut its earnings estimates for the listed asset management companies it covers to reflect an “abysmal market environment,” but said Affiliated Managers Group and Invesco are still relatively attractive.
While analyst D.J. Neiman said the market’s wild volatility makes any estimate a “moving target,” in a report today the firm lowered its average earnings estimate for the six listed managers it covers — including Eaton Vance, Franklin Resources, Janus and T. Rowe Price — by 12% for the third quarter, 8% for calendar year 2008 and 15% for 2009.
Sharp market declines for both U.S. and overseas stocks, together with signs of a “spike in redemptions” in September, have the sector under a cloud of uncertainty.
Still, Mr. Neiman noted that AMG, with $1.2 billion in cash on hand for acquisitions, is one firm that could benefit from the turmoil, noting that Lehman Brother Holdings Inc.’s recent sale of its Neuberger Berman asset management unit for well below 10 times that firm’s cash flow could help lower the pricing on M&A deals in the sector. The continued turnaround of Invesco’s operations makes that firm relatively attractive as well, he said.
