Will This Upgrade Help Federated Investors (FII) Today?

NEW YORK (TheStreet) -- Federated Investors (FII) has been upgraded to "neutral" from "underperform" with a $35 price target, Sterne Agee said Thursday. The firm noted growth headwinds should end soon. 

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Separately, TheStreet Ratings team rates FEDERATED INVESTORS INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate FEDERATED INVESTORS INC (FII) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its increase in stock price during the past year, good cash flow from operations and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Net operating cash flow has significantly increased by 81.51% to $138.77 million when compared to the same quarter last year. Despite an increase in cash flow, FEDERATED INVESTORS INC's cash flow growth rate is still lower than the industry average growth rate of 123.99%.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 16.8%. Since the same quarter one year prior, revenues fell by 12.3%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
  • FEDERATED INVESTORS INC's earnings per share declined by 11.4% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, FEDERATED INVESTORS INC reported lower earnings of $1.55 versus $1.78 in the prior year. This year, the market expects an improvement in earnings ($1.67 versus $1.55).
  • 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, FEDERATED INVESTORS INC's return on equity significantly exceeds that of both the industry average and the S&P 500.

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