Friday, Credit Suisse downgraded AllianceBernstein Holding L.P. (AB) shares to Neutral from Outperform, while increasing its price target to $22 from $20. The brokerage raised its 2009 EPS estimate to $1.27 from $1.07, and its 2010 estimate to $1.50 from $1.20.
Analyst Siegenthaler expects shares of AB to perform in line with the asset manager industry for the next six months, as his expectation of continued net outflows, $15 to $20 billion in third quarter, $10 to $15 billion in fourth quarter, could prevent AB's valuation from moving closer to the mean, 14.2x vs. 18x 2010 EPS.
Additionally, the analyst forecasts net outflows of 3% of asset under management in 2010, 5% lower than his estimate of positive 3% for the industry. While earnings and flows missed the analyst's estimates in second quarter of 2009, he believes AB will be able to improve flows sequentially.
The analyst increased estimates due to the impact of 7.5% market appreciation on AB's funds/revenue and deferred comp, and a lower normalized runrate for both comp & G&A, while the comp does increase in third quarter due to the deferred comp gain. Accordingly, the analyst raised revenues due to the recent gains in equity markets, but also due to an improvement in our operating margin outlook.
The analyst raised his discounted cash flow-derived price target to $22 from $20 which is 14.7x his 2010 estimate. The analyst's $1.27/$1.50 EPS estimates compare to the consensus of $1.24/$1.51, which could be revised following stronger than expected third quarter market performance.
Currently, AB is up $0.17 or 0.80% and trading at $21.48.
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