Piper Jaffray analyst, John Nadel, noted that Ameriprise Financial (NYSE: AMP) core EPS beat but the upside was lower quality. There was a bit more top line pressure than expected but expense controls were excellent. The capital return story remains exceptional, in our view, with another quarter of 10% annualized reduction in share count and the 9th dividend hike in the past seven years to a roughly 3% yield. No change to Overweight rating and the PT increases to $130.

AMP reported 1Q16 Op EPS of $2.17 a penny light of consensus. Ex. pre-announced one-timers (unclear if consensus fully captured these), Core EPS was $2.23. A&WM and Asset Mgmt results were roughly in line while Annuities core results missed us by $0.04 on lower spreads and weaker underwriting results.

Upside on a core basis was driven by:

1) Protection +$0.02 on better underwriting results

2) Corporate +$0.02 on lower G&A

3) +$0.05 from a combination of lower tax rate and lower diluted shares.

A&WM net revenue fell 2% YoY, a bit below our forecast, while PTOI of $205M was roughly in line with our $207M estimate on a 17.1% margin (in line). Against a tough backdrop, wrap net flows totaled $1.8B, FA productivity improved modestly and FA retention/recruiting was strong. We estimate the incremental PTOI from the December Fed hike added $11M vs. our $13.5M forecast. Asset Mgmt net revenues fell 10% YoY vs. our -8% expectation, but PTOI of $149M was roughly in line with our $152M as GAAP margin of 20.6% was slightly above us on solid expense control. Net flows were weak at ($7.9B), or -6.7% annualized, including ($4.3B) of former parent outflows. Ending AUM of $464B was, however, nicely above our $452B estimate (almost entirely in fixed income funds).

Buybacks of $451M were in line and the quarterly dividend was raised 12% to $0.75 p/s (~3% yield). Excess capital remains above $2B, or >$11 p/s. Combination of buybacks and dividends equaled 150% of 1Q16 operating income.

1Q16 upside and higher 2Q16 equity markets partially offset by further spread pressure and lower buyback accretion, we raise our 2016/17E EPS from $9.60/$10.95 to new $9.70/$11.00, respectively.

The PT moves up from $126 to $130, based on 11.8x 2017E EPS (up from prior 11.6x on higher Asset Mgmt P/E multiple).

For an analyst ratings summary and ratings history on Ameriprise Financial click here. For more ratings news on Ameriprise Financial click here.

Shares of Ameriprise Financial closed at $101.07 yesterday.