Citi Sees Valuation Risk At Eaton Vance, $23 Price Target (EV)

Citi Investment Research sees no upside in shares of Eaton Vance EV. It has a Sell rating and a $23 price target, far below where shares are currently trading. In a note to investors, Citi writes, "With F3Q10 (July) “dust settled” it appears F4Q10 (Oct) and F2011 consensus estimates remain at meaningful risk. We would aggressively swap into BEN, trading at sharp P/E discount to EV yet offers greater flow, global and B/S optionality, in our view. F2011 “Street” estimate eased to $1.76 after big miss to consensus ($0.34 vs. $0.38-$0.39 consensus), but: a) still 6% > our forecast; and, b) a whopping ~30% above F3Q10; with F4Q10 off to poor start. In turn, with AUM likely ~1-2% lower MTM – along with adverse mix shift vs. 7/31 (given market impact) question isn’t whether EV can meet the seemingly at risk $0.39 consensus F4Q10 estimate but whether EPS can even rise Q/Q. Needless to say, we believe consensus is overly optimistic and subject to yet another step function lower. We believe the “Street” may be effusive on both revenues and margins." Shares of Eaton Vance lost 50 cents yesterday to close at $26.21.