Invesco Ltd. (NYSE:IVZ), the investment manager posted its best performance in seven quarters when it announced its first quarter results.

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Invesco Ltd. (NYSE:IVZ) First Quater Earnings Climbed 18%

The leading global investment management company said its adjusted Q1 earnings climbed 18 percent to 52 cents a share. The company’s assets under management rose 8 percent to $729.3 billion in the first quarter from a year ago. Keeping in view its strong results, Invesco raised its quarterly dividend by 30 percent to 22.5 cents a share.

On an annual basis, Invesco Ltd. (NYSE:IVZ) pays 90 cents a share, which works out to a yield of 2.8 percent. Its yield is higher than that of the S&P 500 (INDEXSP:.INX), but still one of the lowest in the Finance-Investment Management group.

Sterne Agee, one of the country’s largest independent firms, upgraded Invesco to Buy from Neutral, as they anticipate about 18 percent upside over the next year driven by a combination of EPS growth and multiple expansion.

Sterne Agee feels Invesco Ltd. (NYSE:IVZ) deserves a strong case to trade at a premium multiple vs peers. Some of the reasons attributed include: 1) diversified platform with balanced exposure across a full spectrum of asset classes, product types, distribution channels and regions of the world, 2) strong margin expecting to exit the year over 40 percent, 3) strong organic growth outlook with no out-sized concentration risk, 4) enhanced investment performance to support the sustainability of organic growth trends.

Sterne Agee feels at 12.3 times their 2014E, Invesco Ltd. (NYSE:IVZ) currently trades at roughly a 1.2c multiple discount to its peers. With improved margin outlook, Sterne Agee also raised Invesco’s 13/14 estimates to $2.13 /$2.55 up from $2.09 / $2.43. It also raised Invesco’s price target to $37 based on 14.5x 2014E cash operating earnings as reduced by ~0.30 of net debt on the balance sheet.

In Sterne Agee’s opinion, Invesco Ltd. (NYSE:IVZ) is producing some of the best fundamentals in the group with over +270 bps of sequential margin expansion in 1Q13. The margins are expected to exit the year at least ~150 bps higher.

Sterne Agee feels with the outlook for 40 percent plus margins exiting the year, Invesco Ltd. (NYSE:IVZ) now joins the elite company of BlackRock, Inc. (NYSE:BLK) and T. Rowe Price Group, Inc. (NASDAQ:TROW) as the only traditional asset managers with 40 percent plus margins. Sterne Agee observes that both BLK and TROW trade at a premium multiples to the peer group, warranting higher multiple for Invesco as well.

However Sterne Agee sees some of the risk factors to its bullish view as: 1) Invesco Ltd. (NYSE:IVZ)’s stock trading close to its all-time high, 2) Asset managers normally post strongest first quarter, 3) IVZ’s likely under performance in a broad equity market pullback.