(July 13 – 17:20 ET) – C.I. Fund Management Inc. trumped analyst estimates yesterday, and quickly had its stock downgraded.
Merrill Lynch cut its opinion on C.I. today from a short and long-term ‘buy’ to a short-term ‘accumulate’, and a long-term ‘buy’, “on the basis of valuation”. It has moved up its 12-month estimate on C.I. to $31-$33 from $27-$29, and suggests that in 18 months the stock could approach $36.
Merrill remains positive on the firm and says its deserves a premium to other asset managers, but it believes the premium shouldn’t get any bigger than it is. Merrill likes C.I. though because it continues to lead industry net sales, its operating margin continues to expand, and its partnership structure for investment management is likely to continue to attract top talent. The recent Derek Webb hiring is an obvious example.
Merrill has also upped its earnings estimates on the firm. It notes that apart from gains in its mutual fund business, C.I. is also benefiting from its institutional investment management mandates, and that it is well-positioned to take advantage of falling Canadian corporate tax rates.
-IE Staff