Morgan Stanley: Ameriprise Financial Concerns 'Overblown,' We're Upgrading

In a report published Wednesday, Morgan Stanley analysts upgraded the rating on Ameriprise Financial, Inc (NASDAQ: AMP) from Equal-Weight to Overweight, while raising the price target from $147 to $152. The analysts consider the concerns surrounding the new fiduciary rules related to retirement accounts as "overblown." The analysts believe Ameriprise offers investors "best in class EPS growth and ROE expansion opportunities." The recent decline in the company's share price has created "a compelling entry point to the stock."The company's AWM margins have expanded significantly and there is "additional upside from utilizing excess capacity in the employee channel." Moreover, Ameriprise will benefit from higher interest rates, which the analysts estimate at $0.63 per share in 2016. At around 90 percent of net income, the company's free cash flow generation is among the strongest and management has projected excess capital at approximately $2.5 billion."The DOL released the proposed rules that mandate that any advisor, broker, or insurance agent providing advice to on retirement accounts must act in the clients' best interest. But rather than being a heavily prescriptive ruling that could threaten compensation structures, they proposed a principals-based requirement, which we do not see as being disruptive to Ameriprise's fundamental prospects. In aggregate, we viewed the rules as significantly less onerous than many investors had feared," the report added.