Asset Manager Earnings Should Be Strong

Asset managers are expected to post impressive fourth-quarter earnings when they report in bulk this week. Unfortunately, most analysts believe the good times are already reflected in the share prices.

"As a group, the asset managers finished the year on a high note, as the year-end rally and strong inflows drove asset and earnings growth for the fourth quarter and into 2006," says Matt Snowling, analyst at Friedman Billings Ramsey. Snowling expects the group's earnings for the December quarter to rise roughly 3% from a year earlier, and is looking for growth of 24% for all of 2006, up from 10% in 2005.

Despite his robust earnings forecast, Snowling believes that investors are paying too high a premium for the stocks, which is why he only has a buy rating on one member of the group, Franklin Resources(BEN Quote). ...