Ameriprise or AllianceBernstein: Which is a Better Pick?

Benefits from a stabilizing economy and gradually improving interest-rate scenario have positioned the investment-management industry well. Investment managers are expected to gain further from a rising rate environment.

Additionally, most investment managers have waived off the majority of their fees with the rates rising since 2016. This decline in fee waivers has aided companies’ top-line growth. Moreover, the asset managers witnessed revenue growth in the recently-concluded quarter on the back of increase in assets under management (AUM).

Performance of equity markets remained favorable as reflected by nearly 3% growth of the S&P 500 Index, resulting in a higher AUM.

Therefore, we are focusing on two investment managers — AllianceBernstein Holding L.P. AB and Ameriprise Financial, Inc. AMP.

AllianceBernstein, with a market cap of $2.9 billion, is a publicly-owned investment manager providing research services to its clients and invests in public equity, fixed income, and alternative investment markets globally. On the other hand, Ameriprise operates as a provider of various financial products and services to individual and institutional clients in the United States and globally, and has a market cap of $19.8 billion.

Both Ameriprise and AllianceBernstein carry a Zacks Rank #2 (Buy), with a Value Score of A. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Though both asset managers have similar business trends, deeper research into the financials will help decide which investment option is better.

Price Performance

Both asset managers have outperformed the industry (down 0.8%) in the past year. While shares of AllianceBernstein have gained 26.9%, Ameriprise’s stock inched up 1.7%. So, AllianceBernstein performed better than Ameriprise.

Dividend Yield

Both companies have been deploying capital in terms of dividend payments to enhance shareholder value. AllianceBernstein has a current dividend yield of 8.28%, while Ameriprise has a dividend yield of 2.55%.

As compared with the industry’s average of 2.68%, shareholders of AllianceBernstein gain more.

Leverage Ratio

Ameriprise has debt-to-equity ratio of 0.76 as compared with the industry average of 0.22. But AllianceBernstein, with no debt burden, has an edge over Ameriprise.

Return on Equity (ROE)

ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. ROE for the trailing 12-months for AllianceBernstein and Ameriprise is 17.02% and 36.15%, respectively. While both stocks scored above the industry’s level of 12.95%, Ameriprise reinvests its earnings more efficiently.

Earnings Estimate Revisions & Growth Projections

The Zacks Consensus Estimate for 2018 earnings of AllianceBernstein increased about 2.4%, over the last 60 days. On the other hand, the same for Ameriprise moved 1.7% north for the current year, during the same time frame.

Moreover, earnings for AllianceBernstein for 2018 are projected to jump 13% year over year. For Ameriprise, the Zacks Consensus Estimate is pinned at $14.68 for 2018, reflecting a year-over-year increase of 19.6%.

Hence, Ameriprise reflects better earnings growth prospects.

Sales Growth

Sales for Ameriprise for the current year are projected to be up 8.7% year over year to $13.1 billion. For AllianceBernstein, the Zacks Consensus Estimate is pegged at $2.9 billion for 2018, reflecting year-over-year growth of 7.5%.

Therefore, Ameriprise has an edge here as well.

Conclusion

Our comparative analysis shows that AllianceBernstein is better positioned than Ameriprise when considering price performance, dividend yield and leverage ratio. Ameriprise wins on earnings and sales growth expectations, along with its reinvesting potential.

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