Why Sterne Agee Upgraded Eaton Vance (EV)

NEW YORK (TheStreet) -- Sterne Agee upgraded Eaton Vance (EV) to "buy" from "neutral." The firm said the ratings revision was a valuation call as headwinds could be nearing a bottom. 

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TheStreet Ratings team rates EATON VANCE CORP as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate EATON VANCE CORP (EV) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in net income, growth in earnings per share and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth greatly exceeded the industry average of 16.9%. Since the same quarter one year prior, revenues rose by 13.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 43.3% when compared to the same quarter one year prior, rising from $49.81 million to $71.36 million.
  • EATON VANCE CORP has improved earnings per share by 47.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, EATON VANCE CORP reported lower earnings of $1.51 versus $1.72 in the prior year. This year, the market expects an improvement in earnings ($2.37 versus $1.51).
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Capital Markets industry and the overall market, EATON VANCE CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for EATON VANCE CORP is currently lower than what is desirable, coming in at 34.48%. Regardless of EV's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, EV's net profit margin of 19.80% compares favorably to the industry average.

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