IGM Financial Inc may not post significant earnings growth in the first quarter, Barclays Capital said, and downgraded the No. 2 mutual fund company in Canada to "underweight" from "equal weight."
"We believe that moderating net investment income and a more normalized operating margin will offset the assets under management (AUM) growth's impact on the bottom line," analysts, including John Aiken, wrote in a note to clients.
With IGM shares up 13% year-to-date, the market is pricing in a recurrence of the 12% sequential earnings growth reported last quarter, and this is unlikely to occur, the analysts said.
"IGM's valuation has simply run ahead of itself and slower earnings growth in the first quarter could weigh on its relative valuation," they added.
Barclays analysts have a price target of C$47 on the Winnipeg, Manitoba-based asset manager's shares, which closed at C$49.11 on Toronto Stock Exchange on Monday.
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