Credit Suisse Downgrades DST Systems

In a report published Monday, Credit Suisse analysts downgraded the rating on

from Outperform to Neutral, while raising the price target from $106 to $126. "Our long-time Outperform rating was predicated on DST accelerating the pace of its non-core asset monetization, stabilization/improvement in the operating business and a depressed valuation," the analysts explained. Stephen Hooley took over as CEO in late 2012 and since then he and his team have "steadily been winding down non-core holdings and returning cash to shareholders, while returning the company to steady top line growth after years of declines." The analysts express concern, however, over the absence of "a willingness to explore strategic alternatives for higher multiple segments such as Healthcare." DST Systems would have to consider strategic alternatives to unlock additional value and achieve higher multiple for the HealthCare business. "In our view, the most optimal way to monetize the asset is likely a tax-free spin, including levering the stand-alone business to pay parent DST a dividend," the analysts added. The adj. EPS estimates for 2015 and 2016 have been raised from $5.91 to $6.19 and from $6.48 to $6.60, respectively, based on the company's 1Q15 results.