Why Eaton Vance Corp Sank This Morning

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Eaton Vance Corp fell 4% this morning after Goldman Sachs downgraded the asset management company from neutral to sell.

So what: Along with the upgrade, analyst Marc Irizarry lowered his price target to $33 (from $45), representing about 13% worth of downside to Friday's close. While contrarians might be attracted to Eaton's sharp pullback over the past month, Irizarry thinks there's more room to fall given the strong industry headwinds continuing to work against it.


Now what: Goldman lowered its 2014, 2015, and 2016 EPS estimates for Eaton Vance on a forecast of weaker flows.

"We expect shares of EV to underperform given: (1) Decelerating flow trends and growing capacity concerns in floating rate funds (15% of AuM, 60% of flows in 2013); (2) EM exposure could drive flow/performance choppiness for Parametric and Global Macro Absolute (GMAR), together 10% of AuM; and (3) lackluster performance in the core equity business limits EV's participation in better industry flows," noted Irizarry.

When you couple the risks surrounding Eaton with its seemingly steep P/E of 24 -- a clear premium to the industry -- it's tough to disagree with Goldman's bearish stance. 

More compelling income opportunities
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

The article Why Eaton Vance Corp Sank This Morning originally appeared on Fool.com.

Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum