Canaccord Genuity lowers Jupiter Fund Management to 'sell'

(Sharecast News) - Analysts at Canaccord Genuity downgraded Jupiter Fund Management to 'sell' from 'hold' on Wednesday, citing a weak earnings outlook and non-compelling capital returns. Canaccord said Jupiter's earnings outlook was poor, in its view, which it said was "not remarkable" in the UK traditional asset managers sector in itself, noting that it now expects underlying earnings per share to decline by 55% year-on-year in FY25 and 11% year-on-year in FY26.

The Canadian bank said its forecasts were predicated on -£4.0bn net outflows in FY25, followed by -£0.7bn net outflows in FY26 before turning to net inflows of £3.3bn in FY27. But it also said it sees downside risk to its net flow forecasts.

"Against the steep earnings decline, the capital returns policy does not provide a compelling offset, in our view," said Canaccord Genuity. "The ordinary dividend policy is 50% of pre-performance fee underlying earnings, which introduces significant volatility into the expected dividend return."

Canaccord, which lowered its target price on the stock from 78.0p to 60.0p, also doesn't expect to see further buybacks or special dividends through its forecast horizon.

"Assuming no multiple re-rating or de-rating, we forecast an average annual return for FY24A-26F of -29% p.a., which clearly looks unappealing," said the analysts.

Reporting by Iain Gilbert at Sharecast.com