Bank of America Merrill Lynch says Invesco Ltd. IVZ is set to outperform peers with above average organic growth and higher relative growth rate. Further, the asset manager's well managed costs/capital, and a below average valuation also works in its favor.
"Our expectations are built off of IVZ having ~40% of its LT AUM in passive (incl. smart beta/factor investing) and alternatives which are key growth areas, impressive investment perf in US fixed income which has seen relentless demand for several reasons," analyst Michael Carrier wrote in a note.
On the cost savings front, Invesco plans to eliminate $30 million - $45 million in annual costs beginning in 2017. In addition, the analyst expects the 3.6 percent to continue.
"While IVZ expects $85M of 1x costs in 2016 to implement its plan ($17M already incurred), the payback period is expected to be 3 years and the EPS accretion beginning in 2017 is likely to be $0.06 - $0.08 per year (~3% accretive)," Carrier noted.
Though the Brexit concerns prevail, the analyst believes they're manageable and already priced in to the stock. For context, about 25 percent of IVZ's earnings are derived from the region. That said, the company has hedges to offset a sustained lower level in the GBP through first quarter.
Carrier, who has a Buy rating on the stock, raised the price target to $37 from $33.
At time of writing, shares of Invesco were almost flat at $30.54.
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