Citigroup Analysts Rate Power Corp.'s Companies

Citigroup Global Markets has initiated coverage on Power Corp. of Canada [TSX: POW] and its member companies, telling clients that market volatility, pressured fundamentals and reasonable valuations adds up to a stand pat recommendation for each stock.

Citigroup said:

The Power companies face pressure from slowing EPS growth and portfolio losses at Great West and asset under management outflows at IGM. That said, valuations are reasonable, reflective of the tough environment. As such, we rate each stock Hold.

Regarding insurer Great West LifeCo Inc. (GWLOF.PK), Mr. Walsh said earnings per share growth will slow over the next few years due to equity market volatility that is constraining the wealth management business. He also noted a maturing Canadian market and the sale of the healthcare division at Putnam Investments, a Great West U.S. subsidiary, as other headwinds on future earnings growth. He has a C$33 price target on the stock.

He tagged IGM Financial Inc. [TSX:IGM] with a C$43 price target, saying the asset manager is expected to experience muted asset under management growth and frequent net outflows, resulting in weaker earnings. 

Meanwhile, the analyst has price targets on Power Financial Corp. [TSX:PWF] and Power Corp. - both holding companies with significant ownership in Great West and IGM, of C$34 and C$32, respectively.

Our ratings for the two parent companies are primarily based off our analysis for Great-West and, to a lesser extent, IGM, as they comprise over 65% and
20% of earnings, respectively.