By James Langton

(October 31 – 17:30 ET) – Merrill Lynch has raised its earnings estimates for Investors Group, while cutting its price target on Mackenzie Financial Corp.

Merrill has upped its estimate of assets under management at IG as a result of asset growth experienced in the past quarter. It is forecasting $46.5 billion by the end of 2000, up from $46 billion. For 2001 it is bumping its estimate to $51.6 billion from $51.1 billion. “As a result of these changes and a reduction in our commission amortization assumptions, our 2001 EPS forecast moves from $1.55 to $1.60.”

The brokerage notes that it discussed two issues with the firm in a conference call: sales representative turnover and earnings growth sustainability. It says IG currently targets a 25% hire rate and a 40% retention rate for reps with four years experience. While it is meeting its 40% retention rate, hiring is closer to 20%. Merrill says management continues to target 15%-20% EPS growth, although it warns, “One potential wrinkle in that objective would be the accelerating sales at Scudder MAXXUM which distributes through thirrd party advisors who command higher commission rates.”

“At $22, Investors Group is the most attractively priced stock in our coverage group. We continue to highlight Investors Group as one of our top stock picks in the group on … reiterating our 12-month price of $27.”

On Mackenzie Financial, Merrill says, “We continue to hold a near term Accumulate, long term Buy opinion on the company but have revised our 12-month price objective to $23, from $26.” The brokerages says the cut reflects a slower organic growth rate for the company, with the U.S. subsidiary struggling and decelerating Canadian sales.

Merrill has scaled back its asset forecast for fiscal 2001 to $39.3 billion, from $41 billion, and dropped its 2002 estimate to $43.4 billion from $45.4 billion. The brokerage is dropping its earnings estimates for Mackenzie, too.

On the upside, Merrill highlights Mackenize’s new Capital Class series of units, and its new Managed High Yield funds, noting “the execution structure of the Managed Yield funds is unique to the marketplace and represents Mackenzie’s continued ability to innovate”.